Chapter 13, Problem 1MCQ

To determine

Determine the sales trend percent for the year 2015.

Answer to Problem 1MCQ

Option d: 117%

Explanation of Solution

Horizontal analysis: The comparison of an item of a financial statement of one year against the same item of the same financial statement of another year, to determine the relation between the two items, is referred to as horizontal analysis. Use the following formula to determine the percentage change:

$\text{Percentage Change}=100\times \frac{\text{Later Period}\text{Amount}-\text{Base}\text{Period Amount}}{\text{Base Period Amount}}$

Thus, sales trend percent for the year 2015 is as follows:

$\begin{array}{c}\text{Percentage Change}=100\times \frac{\text{Later Period}\text{Amount}-\text{Base}\text{Period Amount}}{\text{Base Period Amount}}\\ =100\times \frac{\$351,000-\$300,000}{\$300,000}\\ =17\%\end{array}$

Trend percentage for 2015 is 117%$\left(\text{100\%}\left[\text{base}\text{percent}\right]\text{+}\text{17\%}\left[\text{percent}\text{change}\right]\right)$.

The percentage change is 17% and thus, there is an increase of 117% percentage in the year 2015. The calculated answer is matching with the option (d). Hence, option (d) is the correct answer and options (a) (b) (c) and (e) are incorrect.

Conclusion

Thus, the percentage change is 17% and thus, there is an increase of 117% percentage in the year 2015.