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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 Sales $908,800 $710,000 Cost of goods sold 781,200 620,000 Gross profit $127,600 $90,000 Selling expenses $37,760 $32,000 Administrative expenses 34,020 27,000 Total operating expenses $71,780 $59,000 Income before income tax $55,820 $31,000 Income tax expenses 22,300 12,400 Net income $33,520 $18,600 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 $908,800 $710,000 $ % Cost of goods sold 781,200 620,000 % Gross profit $127,600 $90,000 % Selling expenses $37,760 $32,000 % Administrative expenses 34,020 27,000 % Total operating expenses $71,780 $59,000 $ % Income before income tax $55,820 $31,000 % Income tax expense 22,300 12,400 % Net income $33,520 $18,600 % b. The net income for Winthrop Company increased between years. This increase was the combined result of an percentage in cost of goods sold. The cost of goods sold increased at a sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales. in sales and rate than the increase in

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