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

	Current Year			Previous Year
Sales	$925,000			$740,000
Cost of goods sold	768,600			630,000
Gross profit	$156,400			$110,000
Selling expenses	$44,850			$39,000
Administrative expenses	40,590			33,000
Total operating expenses	$85,440			$72,000
Income before income tax	$70,960			$38,000
Income tax expenses	28,400			15,200
Net income	$42,560			$22,800

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	$925,000	$740,000	$fill in the blank 51fc4d00afbd01f_1	fill in the blank 51fc4d00afbd01f_2%
Cost of goods sold	768,600	630,000	fill in the blank 51fc4d00afbd01f_3	fill in the blank 51fc4d00afbd01f_4%
Gross profit	$156,400	$110,000	$fill in the blank 51fc4d00afbd01f_5	fill in the blank 51fc4d00afbd01f_6%
Selling expenses	$44,850	$39,000	$fill in the blank 51fc4d00afbd01f_7	fill in the blank 51fc4d00afbd01f_8%
Administrative expenses	40,590	33,000	fill in the blank 51fc4d00afbd01f_9	fill in the blank 51fc4d00afbd01f_10%
Total operating expenses	$85,440	$72,000	$fill in the blank 51fc4d00afbd01f_11	fill in the blank 51fc4d00afbd01f_12%
Income before income tax	$70,960	$38,000	$fill in the blank 51fc4d00afbd01f_13	fill in the blank 51fc4d00afbd01f_14%
Income tax expense	28,400	15,200	fill in the blank 51fc4d00afbd01f_15	fill in the blank 51fc4d00afbd01f_16%
Net income	$42,560	$22,800	$fill in the blank 51fc4d00afbd01f_17	fill in the blank 51fc4d00afbd01f_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

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.