Income statement data for Neon Flashlight Company for the year ended December 31, 2002 and 2001, are as follows:

a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for 2002 when compared with 2001. Round to one digit after the decimal place.

b. What conclusions can be drawn from the horizontal analysis?

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2002 2001 Sales $940,000 $850,000 Gross profit Cost of goods sold Selling expenses Administrative expenses 610,000 580,000 $330,000 $270,000 $126,000 $137,000 44,000 53,500 Total operating expenses $170,000 $190,500 Income before income tax $160,000 $ 79,500 Income tax expense 60,000 22,000 Net income $100,000 $ 57,500