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

	Current Year			Previous Year
Sales	$442,800			$360,000
Cost of goods sold	372,000			310,000
Gross profit	$70,800			$50,000
Selling expenses	$20,340			$18,000
Administrative expenses	18,150			15,000
Total operating expenses	$38,490			$33,000
Income before income tax	$32,310			$17,000
Income tax expenses	12,900			6,800
Net income	$19,410			$10,200

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 year Amount	Previous year Amount	Increase (Decrease) Amount	Increase (Decrease) Percent
Sales	$442,800	$360,000	$fill in the blank 5cf981f75074fff_1	fill in the blank 5cf981f75074fff_2%
Cost of goods sold	372,000	310,000	fill in the blank 5cf981f75074fff_3	fill in the blank 5cf981f75074fff_4%
Gross profit	$70,800	$50,000	$fill in the blank 5cf981f75074fff_5	fill in the blank 5cf981f75074fff_6%
Selling expenses	$20,340	$18,000	$fill in the blank 5cf981f75074fff_7	fill in the blank 5cf981f75074fff_8%
Administrative expenses	18,150	15,000	fill in the blank 5cf981f75074fff_9	fill in the blank 5cf981f75074fff_10%
Total operating expenses	$38,490	$33,000	$fill in the blank 5cf981f75074fff_11	fill in the blank 5cf981f75074fff_12%
Income before income tax	$32,310	$17,000	$fill in the blank 5cf981f75074fff_13	fill in the blank 5cf981f75074fff_14%
Income tax expense	12,900	6,800	fill in the blank 5cf981f75074fff_15	fill in the blank 5cf981f75074fff_16%
Net income	$19,410	$10,200	$fill in the blank 5cf981f75074fff_17	fill in the blank 5cf981f75074fff_18%

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a. Show the difference in each line item amount as either an increase or a decrease. Divide each difference by the base year amount for that item to obtain the horizontal percentage.

b. The net income for Winthrop Company increased between years. This increase was the combined result of an increase in sales and lower percentage increase in cost of goods sold. The cost of goods sold increased at a slower rate than the increase in sales, thus causing the percentage increase in gross profit to be greater than the percentage increase in sales.

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b. Review the relationship the accounts have and the effect the differences show about the business.

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Partially correct