Horizontal Analysis of the Income Statement

Income statement data for Winthrop Company for two recent years ended December 31 are as follows:

\begin{tabular}{|c|c|c|} \hline & Current Year & Previous Year \\ \hline Sales & $432,300 & $330,000 \\ \hline Cost of merchandise sold & 361,200 & 280,000 \\ \hline Gross profit & $71,100 & $50,000 \\ \hline Selling expenses & $21,780 & $18,000 \\ \hline Administrative expenses & 19,350 & 15,000 \\ \hline Total operating expenses & $41,130 & $33,000 \\ \hline Income before income tax expense & $29,970 & $17,000 \\ \hline Income tax expenses & 12,000 & 6,800 \\ \hline Net income & $17,970 & $10,200 \\ \hline \end{tabular} 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. 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 a a I rate than the increase in sales, thus causing the percentage increase in gross profit to be