E13-3 (Algo) Preparing and Interpreting a Schedule for Horizontal and Vertical Analyses [LO 13-2, LO 13- 3, LO 13-5) 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 2018. 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 Incorporated for the year ended December 31, 2018. 2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. 2-b. Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more gross profit per dollar of sales in 2018 compared to 2017? COMPUTER TYCOON, INCORPORATED Income Statements For the Year Ended December 31 2018 2017 Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income $ 107,000 $ 130,500 63,500 74,300 43,500 56,200 36,700 38,400 570 510 6,230 17,290 1,500 5,700 $ 4,730 $ 11,590 Change in Dollars Percentage % % % % % % % % 2017 % $ % % COMPUTER TYCOON, INCORPORATED Income Statements For the Year Ended December 31 2018 Sales Revenue $ 107,000 Cost of Goods Sold 63,500 Gross Profit 43,500 Selling, General, and Administrative Expenses 36,700 Interest Expense 570 Income before Income Tax Expense 6,230 Income Tax Expense 1,500 Net Income $ 4,730 % % % % % 130,500 74,300 56,200 38,400 510 17,290 5,700 11,590 % % % % % % % % $