Chapter 2, Problem 2.2MAD

a.

To determine

Horizontal analysis of income statement:

In horizontal analysis of income statement, the amount of each item of the current year financial statement is compared with the previous year financial statement. The amount of each item increased or decreased in the current income statement, and its respective percentage can be computed by taking the earlier statement as the base.

To prepare: A horizontal analysis of income statements.

b.

To determine

To interpret: The results of the horizontal analysis.

c.

To determine

To find: The reason to decrease Incorporation C’s revenue and operating income in year 2.