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 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 21 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 your answers to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 Line Item Description" Current Year Amount Previous Year Amount Increase Increase (Decrease) (Decrease) 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 your answers to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Year Line Item Description Sales Amount Previous Year Amount Increase Increase (Decrease) (Decrease) Amount Percent $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) % $26,700 $15,000 Net income Income tax expense (17,800) (10,000) % Net income $26,700 $15,000 % Feedback Check My Work a. Show the difference in each line item amount as either an increase or a decrease, Divide each difference by the base year amount for that item to obtain the horizontal percentage. in sales V rate than b. The net income for Winthrop Company increased between years. This increase was the combined result of an increase and a lower percentage increase in cost of goods sold. The cost of goods sold increased at a slower the increase in sales, thus causing the percentage increase in gross profit to be greater than the percentage increase in sales. Feedback Check My Work b. Review the relationship the accounts have and the effect the differences show about the business.