Income statement data for Winthrop Company for two recent years ended December 3
ID: 2400745 • Letter: I
Question
Income statement data for Winthrop Company for two recent years ended December 31 are as follows:
1
Current Year
Previous Year
2
Sales
$1,846,800.00
$1,620,000.00
3
Cost of goods sold
1,541,430.00
1,401,300.00
4
Gross profit
$305,370.00
$218,700.00
5
Selling expenses
$80,500.00
$70,000.00
6
Administrative expenses
50,600.00
46,000.00
7
Total operating expenses
$131,100.00
$116,000.00
8
Income before income tax
$174,270.00
$102,700.00
9
Income tax expense
12,960.00
8,100.00
10
Net income
$161,310.00
$94,600.00
What conclusions can be drawn from the horizontal analysis? Round the answers to one decimal place.
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.
Winthrop Company
Comparative Income Statement
For the Years Ended December 31
1
Increase (Decrease)
Increase (Decrease)
2
Current Year
Previous Year
Amount
Percent
3
Sales
$1,846,800.00
$1,620,000.00
4
Cost of goods sold
1,541,430.00
1,401,300.00
5
Gross profit
$305,370.00
$218,700.00
6
Selling expenses
$80,500.00
$70,000.00
7
Administrative expenses
50,600.00
46,000.00
8
Total operating expenses
$131,100.00
$116,000.00
9
Income before income tax
$174,270.00
$102,700.00
10
Income tax expense
12,960.00
8,100.00
11
Net income
$161,310.00
$94,600.00
The net income for Winthrop Company increased by approximately _____% this year. This increase was the combined result of an (increase/decrease) in sales of ____% and (lower/higher) (increase/decrease) percentage in cost of goods sold.
The cost of goods sold increased at a (faster/slower) rate than the increase in sales, thus causing the percentage increase in gross profit to be (less/greater) than the percentage increase in sales.
1
Current Year
Previous Year
2
Sales
$1,846,800.00
$1,620,000.00
3
Cost of goods sold
1,541,430.00
1,401,300.00
4
Gross profit
$305,370.00
$218,700.00
5
Selling expenses
$80,500.00
$70,000.00
6
Administrative expenses
50,600.00
46,000.00
7
Total operating expenses
$131,100.00
$116,000.00
8
Income before income tax
$174,270.00
$102,700.00
9
Income tax expense
12,960.00
8,100.00
10
Net income
$161,310.00
$94,600.00
Explanation / Answer
Increase/Decrease Current Previous Amouunt Percent Sales 1846800 1620000 226800 14.00% Cost of Goods sold 1541430 1401300 140130 10.00% Gross Profit 305370 218700 86670 39.63% Selling expensne 80500 70000 10500 15.00% Admin expense 50600 46000 4600 10.00% Total Operating expense 131100 116000 15100 13.02% Income before tax 174270 102700 71570 69.69% Income tax expense 12960 8100 4860 60.00% Net Income 161310 94600 66710 70.52% The net income fr company increased by approx 70.52%. This increase was combined result of an increase in sales of 14% and lower increase percentage in cost of goods sold. The cost of goods sold increased at a slower rate than increase in sales, thus causing the % increasse in gross profit to be greater than percentage increase in sales