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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
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 $762,000 $600,000 Cost of goods sold 644,800 520,000 Gross profit $117,200 $80,000 Selling expenses $33,930 $29,000 25,000 Administrative expenses 31,250 Total operating expenses $65,180 $54,000 Income before income tax $52,020 $26,000 Income tax expenses 20,800 10,400 Net income $31,220 $15,600 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 Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Previous Increase Increase year (Decrease) (Decrease) Amount Amount Amount Percent $762,000 $600,000 % Year Sales Cost of goods sold 644,800 520,000 % Gross profit $117,200 $80,000 $ % Selling expenses $33,930 $29,000 % Administrative expenses 31,250 25,000 % $54,000 $ % Total operating expenses $65,180 Income before income tax $52,020 Income tax expense 20,800 $26,000 % 10,400 % Net income $31,220 $15,600 $ % 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 percentage increase in gross profit to be than the percentage increase in sales. in sales and rate than the increase in sales, thus causing the
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