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.
| Current year Amount | Previous year Amount | 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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