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 Cost of goods sold Gross profit Selling expenses Administrative expenses $541,200 456,000 585,200 $440,000 380,000 $23,730 $60,000 $21,000 18,000 $39,000 21,780 Total operating expenses $45,510 539,690 15,900 Income before income tax Income tax expenses $21,000 8,400 Net income $23,790 $12,600 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 Previous Increase Increase year year (Decrease) (Decrease) Amount Amount Amount Percent Sales $541,200 $440,000 $ Cost of goods sold 456,000 380.000 Gross profit $85,200 $60,000 $ Selling expenses $23.730 $21,000 $ 96 Administrative expenses 21.780 18.000 Total operating expenses Income before income tax $45,510 $39,690 15.900 $23.790 $39.000 $ $21,000 $ 3,400 $12,600 $ Income tax expense Net income in sales and percentage in cost of goods sold. The cost of goods sold increased at a rate than the increase in sales, thus b. The net income for Winthrop Company increased between years. This increase was the combined result of an causing the percentage increase in gross profit to be than the percentage increase in sales.

Answer 1

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Tree Decregte) Prrent 9314 90% 434. Ang » A) - Winthrop Company Comparative Income Stateurent . for the Year Ended December 31 Current Previous Increase year 1 year 1 (Decrease) Amount Amount | arnont Sales 45411,004440,000 19 101,900 cost of Goods sold 1456,000 4 380,000 $ 76,600 Gross Profit Hp 85,200 $ 60, ovo 1$ 25,900 selling Expenses $23,730 $ 21,000 & 2730 Aduministrative Expenses 4 21.780 $ 18,000 | $ 3780 Total Obrating Expenses $ 45,510 * 39.000 4 6,510 Income byose income $39,690 $ 21,000 $ 18,690 АКС Income tax Expense $15,900 $ 400 $ 7500 Net Income $23,790 | $12600 1$ 11,190 134. 21% 16.694. 89% 89.287. 88.807. B) The net income for winthrop Company increased between years. This Increase was the combined crissult of an increase in sales and lower percentage increase in cost of Goods sold. The cost of Goods sold increased at a slower create than the increase in sales, this causing the percentage increase in Gross profit to be greater than the percentage increase in seles.