For 2008, Turnberry 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 two decimal places.

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

Transcribed Image Text:

Turnberry Company Comparative Income Statement For the Years Ended December 31, 2008 and 2007 2008 2007 $482,000 6,000 $429,000 4,000 Sales Sales returns and allowances $476,000 216,000 $260,000 $109,250 52,500 $161,750 $ 98,250 2,000 $100,250 30,000 $ 70,250 $425,000 180,000 $245,000 $ 95,000 30,000 $125,000 $120,000 2,000 $122,000 40,000 $ 82,000 Net sales Cost of goods sold Gross profit Selling expenses Administrative expenses Total operating expenses Income from operations Other income Income before income tax Income tax expense Net income