Question Details

London Company provided the following income statements 


Figure 16-6
London Company provided the following income statements for its first 3 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 

1.	Refer to Figure 16-6.  Prepare a horizontal analysis using Year 1 as the base year. Explain if the results are favorable or unfavorable.

2.	Refer to Figure 16-6. Prepare a vertical analysis by using net sales as the base.



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