Question
Figure 16-6 London Company provided the following income statements for its first three years of operation: Year 1 Year 2 Year 3 Net sales 975,000
Figure 16-6
London Company provided the following income statements for its first three years of operation:
| Year 1 | Year 2 | Year 3 |
Net sales | 975,000 | 1,150,000 | 1,280,000 |
Less: cost of goods sold | (676,000) | (910,000) | (945,000) |
Gross margin | 299,000 | 240,000 | 335,000 |
Less: |
|
|
|
Operating expenses | (185,000) | (215,000) | (235,000) |
Income taxes | (45,600) | (10,000) | (40,000) |
Net income | 68,400 | 15,000 | 60,000 |
13. Refer to Figure 16-6. Prepare a horizontal analysis using year 1 as the base year. Explain if the results are favorable or unfavorable. Use the percentage change method.
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