|
1
|
|
Current Year
|
Previous Year
|
|
2
|
Sales
|
$1,938,000.00
|
$1,700,000.00
|
|
3
|
Cost of goods sold
|
1,608,200.00
|
1,462,000.00
|
|
4
|
Gross profit
|
$329,800.00
|
$238,000.00
|
|
5
|
Selling expenses
|
$67,800.00
|
$60,000.00
|
|
6
|
Administrative expenses
|
49,280.00
|
44,000.00
|
|
7
|
Total operating expenses
|
$117,080.00
|
$104,000.00
|
|
8
|
Income before income tax
|
$212,720.00
|
$134,000.00
|
|
9
|
Income tax expense
|
13,090.00
|
8,500.00
|
|
10
|
Net income
|
$199,630.00
|
$125,500.00
|
| 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? Round the answers to one decimal place. |
|
1
|
|
Current Year
|
Previous Year
|
|
2
|
Sales
|
$2,280,000.00
|
$2,000,000.00
|
|
3
|
Cost of goods sold
|
1,960,000.00
|
1,750,000.00
|
|
4
|
Gross profit
|
$320,000.00
|
$250,000.00
|
|
5
|
Selling expenses
|
$156,500.00
|
$125,000.00
|
|
6
|
Administrative expenses
|
122,000.00
|
100,000.00
|
|
7
|
Total operating expenses
|
$278,500.00
|
$225,000.00
|
|
8
|
Income before income tax
|
$41,500.00
|
$25,000.00
|
|
9
|
Income tax expense
|
16,600.00
|
10,000.00
|
|
10
|
Net income
|
$24,900.00
|
$15,000.00
|
| 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?
|
|
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
|
$2,280,000.00
|
$2,000,000.00
|
|
|
|
4
|
Cost of goods sold
|
1,960,000.00
|
1,750,000.00
|
|
|
|
5
|
Gross profit
|
$320,000.00
|
$250,000.00
|
|
|
|
6
|
Selling expenses
|
$156,500.00
|
$125,000.00
|
|
|
|
7
|
Administrative expenses
|
122,000.00
|
100,000.00
|
|
|
|
8
|
Total operating expenses
|
$278,500.00
|
$225,000.00
|
|
|
|
9
|
Income before income tax
|
$41,500.00
|
$25,000.00
|
|
|
|
10
|
Income tax expense
|
16,600.00
|
10,000.00
|
|
|
|
11
|
Net income
|
$24,900.00
|
$15,000.00
|
|
|
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.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more
Recent Comments