Chapter 17, Problem 1MCQ

A company’s sales in the prior year were $300,000 and in the current year were $351,000. Using the prior year as the base year, the sales trend percent for the current year is

1. a. 17%.
2. b. 85%.
3. c. 100%.
4. d. 117%.
5. e. 48%.

To determine

Determine the sales trend percent for the current year.

Answer to Problem 1MCQ

d. 117%

Explanation of Solution

Trend analysis: Trend analysis is type of horizontal analysis used to calculate the changes in economic cycle of a business for several years in terms of changes in percentage using one of the years as base year. It is computed using the formula:

$\text{Trend percentages}=\frac{\text{Analysis period amount}}{\text{Base period amount}}\times 100$

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

$\begin{array}{c}\begin{array}{l}\text{Sales Trend Percentage }\\ \text{for the current year }\end{array}\}=\frac{\text{Analysis Period Amount}}{\text{Base Period Amount}}\times 100\\ =\frac{\$351,000}{\$300,000}\times 100\\ =117\%\end{array}$

Hence, the sales trend percent for the current year is 117%.

The above calculation is matching with the option d. 117%. Thus, option d. 117% is the correct option.

a. The sales trend for the current year is 17%: it is incorrect option because the sales trend for the current year is 117% not 17%.

b. The sales trend for the current year is 85%: it is incorrect option because sales trend for the current year is 117% not 85%.

c. The sales trend for the current year is 100%: it is incorrect option because the sales trend for the current year is 117% not 100%.

e. The sales trend for the current year is 48%: it is incorrect option because the sales trend for the current year is 117% not 48%.

Conclusion

Thus, the sales trend for the current year is 117%.