Reference no: EM139708

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:

Doane, Inc. Comparative Income Statements for the years ended Dec 31, 2007 and Dec 31, 2008
			2007	2008
Sales			$73,200	$91,500
Sales Return and Allowances			1200	1440
Net Sales			$72,000	$90,060
Cost of Goods Sold			42000	50400
Gross Profit			$30,000	$39,660
Selling Expenses			14400	16560
Administrative Expenses			$9,600	$10,800
Total Operating Expenses			24000	27360
Income from Operations			$6,000	$12,300
Other Income			600	600
Income before Income Tax			$6,600	$12,900
Income Tax Expense			1440	2880
Net Income			$5,160	$10,020

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).