Chapter 14, Problem 14.5EX

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 goods 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	$ 41,500	$ 25,000
Income tax expense	16,600	10,000
Net income	$ 24,900	$ 15,00

1. A. Prepare a comparative income statement with horizontal analysis, indicating the increase
2. B. (decrease) for the current year when compared with the previous year. (Round percentages to one decimal place.)
3. C. What conclusions can be drawn from the horizontal analysis?