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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

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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 $832,000 687,500 Sales Cost of goods sold Gross profit Selling expenses Administrative expenses Total operating expenses Income before income tax Income tax expenses $144,500 $42,480 37,800 $80,280 $650,000 550,000 $100,000 $36,000 30,000 $ 66,000 $34,000 13,600 $64,220 25,700 $38,520 Net income $20,400 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 $832,000 $650,000 $ Cost of goods sold 687,500 550,000 Gross profit $144,500 $100,000 Selling expenses $42,480 $36,000 $ Administrative expenses 37,800 30,000 Total operating expenses $80,280 $56,000 $ Income before income tax $64,220 $34,000 $ Income tax expense 25,700 13,600 Net income $38,520 $20,400 b. The net income for Winthrop Company increased between years. This increase was the combined result of an in sales and 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 percentage in cost of goods than the percentage increase in sales

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