Horizontal analysis of the income statement Obj. 2 Income statement data for Winthrop Company for two recent years ended December 31 are as follows:

Current Year Previous Year Sales $ 2,240,000 $ 2,000,000 Cost of goods sold (1,925,000) (1,750,000)

Gross profit $ 315,000 $ 250,000 Selling expenses $ (152,500) $ (125,000)

Administrative expenses (118,000) (100,000)

Total operating expenses $ (270,500) $ (225,000)

Income before income tax expense $ 44,500 $ 25,000 Income tax expense (17,800) (10,000)

Net income $ 26,700 $ 15,000

a. Prepare a comparative income statement with horizontal analysis, indicating the increase

(decrease) for the current year when compared with the previous year. Round percentages to one decimal place.

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

AppendixLO1