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.

Managerial Accounting
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ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
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Chapter16: Financial Statement Analysis
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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 $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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