Horizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent...
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Accounting
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
$897,900
$730,000
Cost of merchandise sold
750,200
620,000
Gross profit
$147,700
$110,000
Selling expenses
$41,810
$37,000
Administrative expenses
37,510
31,000
Total operating expenses
$79,320
$68,000
Income before income tax expense
$68,380
$42,000
Income tax expenses
27,400
16,800
Net income
$40,980
$25,200
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.
CurrentyearAmount
PreviousyearAmount
Increase(Decrease)Amount
Increase(Decrease)Percent
Sales
$897,900
$730,000
$fill in the blank e5b336001f94fc6_1
fill in the blank e5b336001f94fc6_2%
Cost of merchandise sold
750,200
620,000
fill in the blank e5b336001f94fc6_3
fill in the blank e5b336001f94fc6_4%
Gross profit
$147,700
$110,000
$fill in the blank e5b336001f94fc6_5
fill in the blank e5b336001f94fc6_6%
Selling expenses
$41,810
$37,000
$fill in the blank e5b336001f94fc6_7
fill in the blank e5b336001f94fc6_8%
Administrative expenses
37,510
31,000
fill in the blank e5b336001f94fc6_9
fill in the blank e5b336001f94fc6_10%
Total operating expenses
$79,320
$68,000
$fill in the blank e5b336001f94fc6_11
fill in the blank e5b336001f94fc6_12%
Income before income tax expense
$68,380
$42,000
$fill in the blank e5b336001f94fc6_13
fill in the blank e5b336001f94fc6_14%
Income tax expense
27,400
16,800
fill in the blank e5b336001f94fc6_15
fill in the blank e5b336001f94fc6_16%
Net income
$40,980
$25,200
$fill in the blank e5b336001f94fc6_17
fill in the blank e5b336001f94fc6_18%
Question Content Area
b. The net income for Winthrop Company increased between years. This increase was the combined result of an
increase or decrease
in sales and
higher or lower
percentage
increase or decrease
in cost of merchandise sold. The cost of merchandise 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.
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