Horizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Sales Cost of goods sold Gross profit $665,600 567,000 Previous Year $520,000 450,000 $98,600 $70,000 Selling expenses$29,500 Administrative expenses 26,460 $25,000 21,000 $ 46,000 Total operating expenses$55,960 Income before income tax$42,640 $ 24,000 Income tax expenses 17,1009,600 Net income$ 25,540$ 14,400

Horizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Previous Year $520,000 Sales $665,600 567,000 450,000 Cost of goods sold Gross profit Selling expenses $98,600 $70,000 $29,500 26,460 $25,000 21,000 Administrative expenses $55,960 Total operating expenses Income before income tax Income tax expenses Net income $42,640 17,100 $46,000 $24,000 9,600 $14,400 $25,540 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Previous Increase Increase year year (Decrease) (Decrease) Amount Amount Amount Percent a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Previous Increase Increase year year (Decrease) (Decrease) Amount Amount Amount Percent Sales $665,600 $520,000 $ Cost of goods sold 567,000 450,000 $98,600 $70,000 $ $25,000 $ 21,000 Gross profit Selling expenses Administrative expenses Total operating expenses Income before income tax Income tax expense $29,500 26,460 $55,960 $42,640 17,100 $46,000 $ $24,000 $ 9,600 Net Income $25,540 $14,400 $ b. The net income for Winthrop Company increased between years. This increase was the combined result of an in sales and percentage in cost of goods sold. The cost of goods sold increased at a rate than the increase in sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales