Income statement data for Winthrop Company for two recent years ended December 3
ID: 2514794 • 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
$1,836,800.00
$1,640,000.00
3
Cost of goods sold
1,556,442.00
1,402,200.00
4
Gross profit
$280,358.00
$237,800.00
5
Selling expenses
$79,800.00
$70,000.00
6
Administrative expenses
48,840.00
44,000.00
7
Total operating expenses
$128,640.00
$114,000.00
8
Income before income tax
$151,718.00
$123,800.00
9
Income tax expense
12,300.00
8,200.00
10
Net income
$139,418.00
$115,600.00
What conclusions can be drawn from the horizontal analysis? Round the answers to one decimal place.
The net income for Winthrop Company increased by approximately _______ % this year.
. This increase was the combined result of an increase in sales of _____% and lower percentage increase in cost of goods.
1
Current Year
Previous Year
2
Sales
$1,836,800.00
$1,640,000.00
3
Cost of goods sold
1,556,442.00
1,402,200.00
4
Gross profit
$280,358.00
$237,800.00
5
Selling expenses
$79,800.00
$70,000.00
6
Administrative expenses
48,840.00
44,000.00
7
Total operating expenses
$128,640.00
$114,000.00
8
Income before income tax
$151,718.00
$123,800.00
9
Income tax expense
12,300.00
8,200.00
10
Net income
$139,418.00
$115,600.00
Explanation / Answer
Previous year Current Year Increase Amount % Sales 1640000 1836800 196800 12% Cost of goods sold 1402200 1556442 154242 11% Gross Profit 237800 280358 42558 18% Selling Expenses 70000 79800 9800 14% Administrative Expenses 44000 48840 4840 11% Total Operating Expenses 114000 128640 14640 13% Income before income taxes 123800 151718 27918 23% Income Tax expense 8200 12300 4100 50% Net income 115600 139418 23818 21% The sales has increased by 12% and the cost of goods sold has increased at a lower percentage of 11%, thereby resulting in an increase in gross profit by 18%.