Horizontal Analysis of the Income StatementIncome statement data for Winthrop Company for two recent years ended December 31 are as follows: Current Year Previous YearSales$565,800 $460,000 Cost of merchandise sold468,000 390,000 Gross profit$97,800 $70,000 Selling expenses$27,120 $24,000 Administrative expenses25,410 21,000 Total operating expenses$52,530 $45,000 Income before income tax expense$45,270 $25,000 Income tax expenses18,100 10,000 Net income$27,170 $15,000 Question Content Areaa. 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 CompanyComparative Income StatementFor the Years Ended December 31 CurrentyearAmountPreviousyearAmountIncrease(Decrease)AmountIncrease(Decrease)PercentSales$565,800$460,000$fill in the blank 46d3e2fd0fa5079_1fill in the blank 46d3e2fd0fa5079_2%Cost of merchandise sold468,000390,000fill in the blank 46d3e2fd0fa5079_3fill in the blank 46d3e2fd0fa5079_4%Gross profit$97,800$70,000$fill in the blank 46d3e2fd0fa5079_5fill in the blank 46d3e2fd0fa5079_6%Selling expenses$27,120$24,000$fill in the blank 46d3e2fd0fa5079_7fill in the blank 46d3e2fd0fa5079_8%Administrative expenses25,41021,000fill in the blank 46d3e2fd0fa5079_9fill in the blank 46d3e2fd0fa5079_10%Total operating expenses$52,530$45,000$fill in the blank 46d3e2fd0fa5079_11fill in the blank 46d3e2fd0fa5079_12%Income before income tax expense$45,270$25,000$fill in the blank 46d3e2fd0fa5079_13fill in the blank 46d3e2fd0fa5079_14%Income tax expense18,10010,000fill in the blank 46d3e2fd0fa5079_15fill in the blank 46d3e2fd0fa5079_16%Net income$27,170$15,000$fill in the blank 46d3e2fd0fa5079_17fill in the blank 46d3e2fd0fa5079_18% Question Content Areab. The net income for Winthrop Company increased between years. This increase was the combined result of an in sales and percentage in cost of merchandise sold. The cost of merchandise sold increased at a rate than the increase in sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales.

In order to spot trends, patterns, and shifts in financial performance, horizontal analysis compares…

Answered: al Analysis of the Income Statement…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 CompanyComparative Income StatementFor the Years Ended December 31

	Current year Amount	Previous year Amount	Increase (Decrease) Amount	Increase (Decrease) Percent
Sales	$565,800	$460,000	$fill in the blank 46d3e2fd0fa5079_1	fill in the blank 46d3e2fd0fa5079_2%
Cost of merchandise sold	468,000	390,000	fill in the blank 46d3e2fd0fa5079_3	fill in the blank 46d3e2fd0fa5079_4%
Gross profit	$97,800	$70,000	$fill in the blank 46d3e2fd0fa5079_5	fill in the blank 46d3e2fd0fa5079_6%
Selling expenses	$27,120	$24,000	$fill in the blank 46d3e2fd0fa5079_7	fill in the blank 46d3e2fd0fa5079_8%
Administrative expenses	25,410	21,000	fill in the blank 46d3e2fd0fa5079_9	fill in the blank 46d3e2fd0fa5079_10%
Total operating expenses	$52,530	$45,000	$fill in the blank 46d3e2fd0fa5079_11	fill in the blank 46d3e2fd0fa5079_12%
Income before income tax expense	$45,270	$25,000	$fill in the blank 46d3e2fd0fa5079_13	fill in the blank 46d3e2fd0fa5079_14%
Income tax expense	18,100	10,000	fill in the blank 46d3e2fd0fa5079_15	fill in the blank 46d3e2fd0fa5079_16%
Net income	$27,170	$15,000	$fill in the blank 46d3e2fd0fa5079_17	fill in the blank 46d3e2fd0fa5079_18%

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b. The net income for Winthrop Company increased between years. This increase was the combined result of an

in sales and

percentage

in cost of merchandise sold. The cost of merchandise sold increased at a

rate than the increase in sales, thus causing the percentage increase in gross profit to be

than the percentage increase in sales.

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	Current Year	Previous Year
Sales	$565,800		$460,000
Cost of merchandise sold	468,000		390,000
Gross profit	$97,800		$70,000
Selling expenses	$27,120		$24,000
Administrative expenses	25,410		21,000
Total operating expenses	$52,530		$45,000
Income before income tax expense	$45,270		$25,000
Income tax expenses	18,100		10,000
Net income	$27,170		$15,000

al 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 $565,800 $460,000 Cost of merchandise sold 468,000 390,000 Gross profit $97,800 $70,000 Selling expenses

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