Horizontal Analysis of the Income StatementIncome statement data for Winthrop Company for two recent years ended December 31 are as follows:Current YearPrevious YearSales$2,280,000$2,000,000Cost of merchandise sold1,960,0001,750,000Gross profit$320,000$250,000Selling expenses$156,500$125,000Administrative expenses122,000100,000Total operating expenses$278,500$225,000Income before income tax expense$41,500$25,000Income tax expenses16,60010,000Net income$24,900$15,000 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 31CurrentPreviousIncreaseIncreaseyearyear(Decrease) (Decrease)AmountAmountAmountPercentSales$2,280,000 $2,000,000 $%Cost of merchandise sold1,960,000 1,750,000%Gross profit$320,000$250,000 $%Selling expenses$156,500$125,000 $%Administrative expenses122,000100,000%Total operating expenses$278,500$225,000 $%Income before income tax expense41,50025,000%Income tax expense16,60010,000Net income$24,900$15,000%b. The net income for Winthrop Company increased between years. This increase was the combined result of anin sales andpercentagein cost ofmerchandise sold. The cost of merchandise sold increased at arate than the increase in sales, thus causing the percentage increase in gross profit to bethan thepercentage increase in sales.

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Description: Horizontal Analysis of the Income StatementIncome statement data for Winthrop Company for two recent years ended December 31 are as follows:Current YearPrevious YearSales$2,280,000$2,000,000Cost of merchandise sold1,960,0001,750,000Gross profit$320,

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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 $2,280,000 $2,000,000 Cost of merchandise sold 1,960,000 1,750,000 Gross profit $320,000 $250,000 Selling expenses $156,500 $125,000 Administrative expenses 122,000 100,000 Total operating expenses $278,500 $225,000 Income before income tax expense $41,500 $25,000 Income tax expenses 16,600 10,000 Net income $24,900 $15,000

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 $2,280,000 $2,000,000 Cost of merchandise sold 1,960,000 1,750,000 Gross profit $320,000 $250,000 Selling expenses $156,500 $125,000 Administrative expenses 122,000 100,000 Total operating expenses $278,500 $225,000 Income before income tax expense $41,500 $25,000 Income tax expenses 16,600 10,000 Net income $24,900 $15,000

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

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