According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016.

Required: 1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016.

2. Conduct a vertical analysis by expressing each line as a percentage of total revenues.

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COMPUTER TYCOON, INC. Income Statements For the Year Ended December 31 Change in 2016 2015 Dollars Percentage 112,000 $ 138,000 Sales Revenue Cost of Goods Sold 66,000 76,300 % Gross Profit 61,700 46,000 Selling, General, and Administrative Expenses 37,200 39,400 Interest Expense % 620 535 21,765 % Income before Income Tax Expense 8,180 Income Tax Expense % 2,000 6,200 % Net Income 6,180 15,565 COMPUTER TYCOON, INC Income Statements For the Year Ended December 31 2016 2015 $ Sales Revenue % $ 112,000 138,000 % Cost of Goods Sold 66,000 76,300 61,700 Gross Profit 46,000 Selling, General, and Administrative Expenses 37,200 39,400 Interest Expense % % 620 535 Income before Income Tax Expense 8,180 % % 21,765 Income Tax Expense 2,000 % 6,200 $ 6,180 15,565 % Net Income