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 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. Sales Cost of goods sold Gross profit Selling expenses Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Previous Increase Increase year Amount year Amount (Decrease) Amount (Decrease) Percent $2,240,000 $2,000,000 (1,925,000) (1,750,000) $315,000 $250,000 $(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 % % % 96 % % percentage b. The net income for Winthrop Company increased between years. This increase was the combined result of an D in cost of goods sold. The cost of goods sold increased at al increase in sales, thus causing the percentage increase in gross profit to be in sales and a rate than the than the percentage increase in sales.