For 2008, Phoenix Technology Company reported its most significant decline in net income in years. At the end of the year, Hai Chow, the president, is presented with the following condensed comparative income statement:

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 the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in(1).

Phoenix Technology Company Comparative Income Statement For the Years Ended December 31, 2008 and 2007 2008 2007 $343,200 3,200 380,200 $340,000 144,000 . $200,200 $196,000 76,000 24,000 $117,400 $100,000 82,800 96,000 1,600 84,400 97,600 32,000 47,600 65.600 Sales _ . . . Sales returns and allowances Net sales . S385,000 4,800 ...__... ..._....... . . . .. . . .. . .. . .. $ Gross profit... 87,400 30,000 Total operating expenses . . . . 1,600 Income before income tax . . 36,800 Net income . . . .