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

Question Content Area

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	$2,240,000	$2,000,000	$fill in the blank af73bb050047059_1	fill in the blank af73bb050047059_2%
Cost of goods sold	(1,925,000)	(1,750,000)	fill in the blank af73bb050047059_3	fill in the blank af73bb050047059_4%
Gross profit	$315,000	$250,000	$fill in the blank af73bb050047059_5	fill in the blank af73bb050047059_6%
Selling expenses	$(152,500)	$(125,000)	fill in the blank af73bb050047059_7	fill in the blank af73bb050047059_8%
Administrative expenses	(118,000)	(100,000)	fill in the blank af73bb050047059_9	fill in the blank af73bb050047059_10%
Total operating expenses	$(270,500)	$(225,000)	$fill in the blank af73bb050047059_11	fill in the blank af73bb050047059_12%
Income before income tax expense	$44,500	$25,000	$fill in the blank af73bb050047059_13	fill in the blank af73bb050047059_14%
Income tax expense	(17,800)	(10,000)	fill in the blank af73bb050047059_15	fill in the blank af73bb050047059_16%
Net income	$26,700	$15,000	$fill in the blank af73bb050047059_17	fill in the blank af73bb050047059_18%

Question Content Area

b. The net income for Winthrop Company increased between years. This increase was the combined result of an

increasedecrease

in sales and a

higherlower

percentage

increasedecrease

in cost of goods sold. The cost of goods sold increased at a

slowerfaster

rate than the increase in sales, thus causing the percentage increase in gross profit to be

greaterless

than the percentage increase in sales.