Question: Income statement data for Winthrop Company for two recent years ended December 31 are as follows: 1 Current Year Previous Year 2 Sales $2,280,000.00 $2,000,000.00

Income statement data for Winthrop Company for two recent years ended December 31 are as follows:

Current Year

Previous Year

Sales

$2,280,000.00

$2,000,000.00

Cost of goods sold

1,960,000.00

1,750,000.00

Gross profit

$320,000.00

$250,000.00

Selling expenses

$156,500.00

$125,000.00

Administrative expenses

122,000.00

100,000.00

Total operating expenses

$278,500.00

$225,000.00

Income before income tax

$41,500.00

$25,000.00

Income tax expense

16,600.00

10,000.00

Net income

$24,900.00

$15,000.00

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

Income Sheet

Winthrop Company

Comparative Income Statement

For the Years Ended December 31

What conclusions can be drawn from the horizontal analysis?

The net income for Winthrop Company increased by 66% between years. This increase was the combined result of an in sales of 14% 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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