Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $418,200 $340,000 Cost of goods sold 350,900 290,000 Gross profit $67,300 $50,000 Selling expenses $19,210 $17,000 Administrative expenses 16,940 14,000 Total operating expenses $36,150 $31,000 Income before income tax $31,150 $19,000 Income tax expenses 12,500 7,600 Net income $18,650 $11,400 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 $418,200 $340,000 $fill in the blank ad4c3afcb05e034_1 fill in the blank ad4c3afcb05e034_2% Cost of goods sold 350,900 290,000 fill in the blank ad4c3afcb05e034_3 fill in the blank ad4c3afcb05e034_4% Gross profit $67,300 $50,000 $fill in the blank ad4c3afcb05e034_5 fill in the blank ad4c3afcb05e034_6% Selling expenses $19,210 $17,000 $fill in the blank ad4c3afcb05e034_7 fill in the blank ad4c3afcb05e034_8% Administrative expenses 16,940 14,000 fill in the blank ad4c3afcb05e034_9 fill in the blank ad4c3afcb05e034_10% Total operating expenses $36,150 $31,000 $fill in the blank ad4c3afcb05e034_11 fill in the blank ad4c3afcb05e034_12% Income before income tax $31,150 $19,000 $fill in the blank ad4c3afcb05e034_13 fill in the blank ad4c3afcb05e034_14% Income tax expense 12,500 7,600 fill in the blank ad4c3afcb05e034_15 fill in the blank ad4c3afcb05e034_16% Net income $18,650 $11,400 $fill in the blank ad4c3afcb05e034_17 fill in the blank ad4c3afcb05e034_18% 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 goods sold. The cost of goods 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.
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 | $418,200 | $340,000 | |||
Cost of goods sold | 350,900 | 290,000 | |||
Gross profit | $67,300 | $50,000 | |||
Selling expenses | $19,210 | $17,000 | |||
Administrative expenses | 16,940 | 14,000 | |||
Total operating expenses | $36,150 | $31,000 | |||
Income before income tax | $31,150 | $19,000 | |||
Income tax expenses | 12,500 | 7,600 | |||
Net income | $18,650 | $11,400 |
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 | $418,200 | $340,000 | $fill in the blank ad4c3afcb05e034_1 | fill in the blank ad4c3afcb05e034_2% |
Cost of goods sold | 350,900 | 290,000 | fill in the blank ad4c3afcb05e034_3 | fill in the blank ad4c3afcb05e034_4% |
Gross profit | $67,300 | $50,000 | $fill in the blank ad4c3afcb05e034_5 | fill in the blank ad4c3afcb05e034_6% |
Selling expenses | $19,210 | $17,000 | $fill in the blank ad4c3afcb05e034_7 | fill in the blank ad4c3afcb05e034_8% |
Administrative expenses | 16,940 | 14,000 | fill in the blank ad4c3afcb05e034_9 | fill in the blank ad4c3afcb05e034_10% |
Total operating expenses | $36,150 | $31,000 | $fill in the blank ad4c3afcb05e034_11 | fill in the blank ad4c3afcb05e034_12% |
Income before income tax | $31,150 | $19,000 | $fill in the blank ad4c3afcb05e034_13 | fill in the blank ad4c3afcb05e034_14% |
Income tax expense | 12,500 | 7,600 | fill in the blank ad4c3afcb05e034_15 | fill in the blank ad4c3afcb05e034_16% |
Net income | $18,650 | $11,400 | $fill in the blank ad4c3afcb05e034_17 | fill in the blank ad4c3afcb05e034_18% |
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 goods sold. The cost of goods 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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