Response to the following problem:
Income statement data for Scribe Paper Company for the year ended December 31, 2007 and 2006, are as follows:
2007 2006
Sales $66,300 $85,000
Cost of goods sold 32,000 40,000
Gross profit $34,300 $45,000
Selling expenses $24,000 $25,000
Administrative expenses 7,500 6,000
Total operating expenses $31,500 $31,000
Income before income tax $ 2,800 $14,000
Income tax expense 1,000 6,000
Net income $ 1,800 $ 8,000
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for 2007 when compared with 2006. Round to two decimal places.
b. What conclusions can be drawn from the horizontal analysis?