Prepare a comparative common-size income statement for Enchanted Designs, Inc., using the 2007 and 2006 data of Exercise 17-13 and rounding percentages to one-tenth percent (three decimal places). To an investor, how does 2007 compare with 2006? Explain your reasoning.

Exercise 17-13 

Prepare a horizontal analysis of the following comparative income statement of Enchanted Designs, Inc. Round percentage changes to the nearest one-tenth percent (three decimal places):

Why did net income increase by a higher percentage than net sales revenue during 2007?

ENCHANTED DESIGNS Comparative Income Statement Years Ended December 31, 2007 and 2006 2007 2006 Net sales revenue Expenses: Cost of goods sold Selling and general expenses Other expense Total expenses Net income $430,000 $373,000 $202,000 $188,000 98,000 93,000 7,000 4,000 307,000 285,000 $123,000 $ 88.000