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 $2,280,000 1,960,000 Cost of merchandise sold Gross profit $320,000 $156,500 Selling expenses Administrative expenses Total operating expenses $2,000,000 1,750,000 $250,000 $125,000 100,000 $225,000 $25,000 122,000 $278,500 Income before income tax expense $41,500 Income tax expenses 16,600 10,000 Net income $24,900 $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. Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Previous Increase Increase year year (Decrease) (Decrease) Amount Amount Amount Percent Sales $2,280,000 $2,000,000 $ % Cost of merchandise sold 1,960,000 1,750,000 % Gross profit $320,000 $250,000 % Selling expenses $156,500 $125,000 % Administrative expenses 122,000 100,000 % Total operating expenses $278,500 $225,000 % Income before income tax expense 41,500 25,000 % Income tax expense 16,600 10,000 % Net income $24,900 $15,000 % in b. The net income for Winthrop Company increased between years. This increase was the combined result of an sales and percentage in cost of merchandise sold. The cost of merchandise sold increased at a rate then the increase in sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales