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 $645,000 $500,000 Cost of merchandise sold 554,400 440,000 Gross profit $90,600 $60,000 Selling expenses $27,370 $23,000 Administrative expenses 24,130 19,000 Total operating expenses $51,500 $42,000 Income before income tax expense $39,100 $18,000 Income tax expenses 15,600 7,200 Net income $23,500 $ $10,800 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 $645,000 $500,000 % Cost of merchandise sold 554,400 440,000 % Gross profit $90,600 $60,000 % Selling expenses $ 27,370 $23,000 % Administrative expenses 24,130 19,000 % Total operating expenses $51,500 $42,000 % Income before income tax expense $39,100 $18,000 % Selling expenses $27,370 $23,000 Administrative expenses 24,130 19,000 Total operating expenses $51,500 $42,000 Income before income tax expense $39,100 $18,000 15,600 7,200 Income tax expenses Net income $23,500 $10,800 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 $645,000 $500,000 % Cost of merchandise sold 554,400 440,000 % Gross profit $90,600 $60,000 % Selling expenses $27,370 $23,000 % Administrative expenses 24,130 19,000 % $42,000 % % Total operating expenses $51,500 Income before income tax expense $39,100 Income tax expense 15,600 Net income $23,500 $ $18,000 $ 7,200 % $10,800 % b. The net income for Winthrop Company increased between years. This increase was the combined result of an percentage in cost of merchandise sold. The cost of merchandise sold increased at a the percentage increase in gross profit to be than the percentage increase in sales. in sales and rate than the increase in sales, thus causing