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Horizontal analysis of income statement

For $20$Y$2,$ Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement:

Macklin Inc.

Comparative Income Statement

For the Years Ended December $31,20$Y$2$ and $20$Y$1$

Line Item Description $20$Y$220$Y$1$

Sales $$846,417$ $$741,000$

Cost of goods sold $(611,000)(470,000)$

Gross profit $$235,417$ $$271,000$

Selling expenses $$(85,250)$ $$(62,000)$

Administrative expenses $(49,530)(39,000)$

Total operating expenses $$(134,780)$ $$(101,000)$

Operating income $$100,637$ $$170,000$

Other revenue $4,0213,100$

Income before income tax expense $$104,658$ $$173,100$

Income tax expense $(29,300)(51,900)$

Net income $$75,358$ $$121,200$

Required:

Question Content Area

$1.$ Prepare a comparative income statement with horizontal analysis for the two$-$year period, using $20$Y$1$ as the base year. Use the minus sign to indicate a decrease in the "Increase$/($Decrease$)"$ columns. If required, round percentages to one decimal place.

Macklin Inc.

Comparative Income Statement

For the Years Ended December $31,20$Y$2$ and $20$Y$1$

Line Item Description

$20$Y$2$

$20$Y$1$ Increase$/$

$($Decrease$)$

Amount Increase$/$

$($Decrease$)$

Percent

Sales $$846,417$ $$741,000$ $Sales Sales$\%$

Cost of goods sold $(611,000)(470,000)$ Cost of goods sold Cost of goods sold$\%$

Gross profit $$235,417$ $$271,000$ $Gross profit Gross profit$\%$

Selling expenses $$(85,250)$ $$(62,000)$ $Selling expenses Selling expenses$\%$

Administrative expenses $(49,530)(39,000)$ Administrative expenses Administrative expenses$\%$

Total operating expenses $$(134,780)$ $$(101,000)$ $Total operating expenses Total operating expenses$\%$

Operating income $$100,637$ $$170,000$ $Operating income Operating income$\%$

Other revenue $4,0213,100$ Other revenue Other revenue$\%$

Income before income tax expense $$104,658$ $$173,100$ $Income before income tax expense Income before income tax expense$\%$

Income tax expense $(29,300)(51,900)$ Income tax expense Income tax expense$\%$

Net income $$75,358$ $$121,200$ $Net income Net income$\%$

Question Content Area

$2.$ Net income has fill in the blank $1$ of $4$

from $20$Y$1$ to $20$Y$2.$ Sales have fill in the blank $2$ of $4$

; however, the cost of goods sold has fill in the blank $3$ of $4$

at a faster rate than sales, causing the gross profit to fill in the blank $4$ of $4$

$.$

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