Making of comparative income statement with horizontal analysis.
For 2008, Doane Inc. reported its most significant increase in net income in years. At the end of the year, Jeff Newton, the president, is presented with the following condensed comparative income statement:
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Doane, Inc.
Comparative Income Statements
for the years ended Dec 31, 2007 and Dec 31, 2008
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2007
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2008
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Sales
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$73,200
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$91,500
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Sales Return and Allowances
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1200
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1440
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Net Sales
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$72,000
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$90,060
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Cost of Goods Sold
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50400
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Gross Profit
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$30,000
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$39,660
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Selling Expenses
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14400
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16560
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Administrative Expenses
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$9,600
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$10,800
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Total Operating Expenses
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24000
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27360
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Income from Operations
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$6,000
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$12,300
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Other Income
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600
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600
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Income before Income Tax
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$6,600
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$12,900
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Income Tax Expense
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1440
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2880
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Net Income
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$10,020
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Instructions:
1. Prepare a comparative income statement with horizontal analysis for the two-year period using 2007 as the base year. Round to one decimal place.
2. To extend the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).