Common-Size Income Statements and Horizontal Analysis Income statements for Mariners Corp. for the past two years are as follows:

Required 1. Using the format in Exhibit 13-6, prepare common-size comparative income statements for the two years for Mariners Corp.
2. What observations can you make about the common-size statements? List at least four observations.
3. Using the format in Exhibit 13-2, prepare comparative income statements for Mariners Corp., including columns for the dollars and for the percentage increase or decrease in each item on the statement.
4. Identify the two items on the income statement that experienced the largest change from one year to the next. For each of these items, explain where you would look to find additional information about the change.

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Sales revenue Cost of goods sold Gross profit Selling and administrative expense Operating income Interest expense Income before tax Income tax expense Net income (amounts in thousands of dollars) 2008 2007 $60,000 $50,000 42,000 30,000 $18,000 $20,000 9,000 5,000 $ 9,000 $15,000 2,000 2,000 $ 7,000 2,000 $13,000 4,000 $ 5,000 $ 9,000