For 20Y2, 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, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$338,064		$304,000
Cost of goods sold	(235,600)		(190,000)
Gross profit	$102,464		$114,000
Selling expenses	$(33,800)		$(26,000)
Administrative expenses	(19,460)		(16,000)
Total operating expenses	$(53,260)		$(42,000)
Operating income	$49,204		$72,000
Other revenue	1,652		1,300
Income before income tax expense	$50,856		$73,300
Income tax expense	(14,200)		(22,000)
Net income	$36,656		$51,300

Required:

1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 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, 20Y2 and 20Y1

	20Y2	20Y1	Increase/ (Decrease) Amount	Increase/ (Decrease) Percent
Sales	$338,064	$304,000	$fill in the blank a2ce1b04df8df8b_1	fill in the blank a2ce1b04df8df8b_2%
Cost of goods sold	(235,600)	(190,000)	fill in the blank a2ce1b04df8df8b_3	fill in the blank a2ce1b04df8df8b_4%
Gross profit	$102,464	$114,000	$fill in the blank a2ce1b04df8df8b_5	fill in the blank a2ce1b04df8df8b_6%
Selling expenses	$(33,800)	$(26,000)	$fill in the blank a2ce1b04df8df8b_7	fill in the blank a2ce1b04df8df8b_8%
Administrative expenses	(19,460)	(16,000)	fill in the blank a2ce1b04df8df8b_9	fill in the blank a2ce1b04df8df8b_10%
Total operating expenses	$(53,260)	$(42,000)	$fill in the blank a2ce1b04df8df8b_11	fill in the blank a2ce1b04df8df8b_12%
Operating income	$49,204	$72,000	$fill in the blank a2ce1b04df8df8b_13	fill in the blank a2ce1b04df8df8b_14%
Other revenue	1,652	1,300	fill in the blank a2ce1b04df8df8b_15	fill in the blank a2ce1b04df8df8b_16%
Income before income tax expense	$50,856	$73,300	$fill in the blank a2ce1b04df8df8b_17	fill in the blank a2ce1b04df8df8b_18%
Income tax expense	(14,200)	(22,000)	fill in the blank a2ce1b04df8df8b_19	fill in the blank a2ce1b04df8df8b_20%
Net income	$36,656	$51,300	$fill in the blank a2ce1b04df8df8b_21	fill in the blank a2ce1b04df8df8b_22%

Feedback

Compute the difference in each line item amount as either an increase or a decrease. Divide each difference by the 20Y1 base year amount for that item to obtain the horizontal percentage.

2. Net income has

increaseddecreased

from 20Y1 to 20Y2. Sales have

increaseddecreased

; however, the cost of goods sold has

increaseddecreased

at a faster rate than sales, causing the gross profit to

increasedecrease

.