Question

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	$932,400			$740,000
Cost of goods sold	787,200			640,000
Gross profit	$145,200			$100,000
Selling expenses	$41,760			$36,000
Administrative expenses	37,200			30,000
Total operating expenses	$78,960			$66,000
Income before income tax	$66,240			$34,000
Income tax expenses	26,500			13,600
Net income	$39,740			$20,400

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	$932,400	$740,000	$	%
Cost of goods sold	787,200	640,000		%
Gross profit	$145,200	$100,000	$	%
Selling expenses	$41,760	$36,000	$	%
Administrative expenses	37,200	30,000		%
Total operating expenses	$78,960	$66,000	$	%
Income before income tax	$66,240	$34,000	$	%
Income tax expense	26,500	13,600		%
Net income	$39,740	$20,400	$	%

Answer 1

Correct Answer:

Winthrop Company
Comparative Income Statement
For the Years Ended December 31
	Current	Previous	Increase	Increase
	year	year	(Decrease)	(Decrease)
	Amount	Amount	Amount	Percent
Sales	932400	740000	192400	26%
Cost of goods sold	7,87,200	6,40,000	147200	23%
Gross profit	1,45,200	1,00,000	45200	45%
Selling expenses	41760	36000	5760	16%
Administrative expenses	37,200	30,000	7200	24%
Total operating expenses	78,960	66,000	12960	20%
Income before income tax	66,240	34,000	32240	95%
Income tax expense	26,500	13,600	12900	95%
Net income	39,740	20,400	19,340	95%

End of answer.

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