Question
Asked Dec 23, 2019
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Income statement data for Winthrop Company for two recent years ended December 31 are as follows:

Please see  the attachment for details:

a. 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?

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

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Expert Answer

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(a)

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Horizontal analysis Comparative Income Statement Previous Amount Current Particulars Year Increase (Decrease) Percentage Year 14.0 2,280,000 2,000,000 280,000 210,000 70,000 Sales 1,960,000 320.000 Cost of goods sold Gross profit Selling expenses 1,750,000 250.000 12.0 28.0 156,500 125,000 100,000 31,500 25.2 22,000 Administrative 122,000 22.0 expenses Total operating 278.500 225.000 53.500 23.8 expenses 16,500 25,000 41,500 Income before 66.0 income tax 6,600 9.900 Income tax expense Net income 16,600 24.900 10,000 15.000 66.0 66.0

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