Question

1. The comparative income statement of Lawn Products, Inc. showed sales of $325,000 in 2004 and $494,450 in 2005. Compute the percentage of net change in sales. (Round answer to one decimal place.)a. 52.1%b. 34.3%c. 48.5%d. 65.7%

2. The balance sheet of Food Products, Inc. showed owners' equity of $200,000 in 2001 and $320,000 in 2002. Compute the percentage of increase in owners' equity. (Round answer to one decimal place.)a. 37.5%b. 62.5%c. 60.0%d. 38.4%

Answer 1

Solution :

1. The percentage of net change in sales is calculated as follows

= [ ( Sales in Year 2005 – Sales in 2004 ) / Sales in 2004 ] * 100

As per the information available we have

Sales in Year 2005 = $ 494,450 ; Sales in 2004 = $ 325,000

Applying the above in the formula we have the percentage of net change in sales as

= [ ( $ 494,450 - $ 325,000 ) / $ 325,000 ]

= ( $ 169,450 / $ 325,000 )

= 0.521385

= 52.1385 %

= 52.1 % ( when rounded off to one decimal place )

Thus the percentage of net change in sales is = 52. 1%

The solution is option a. 52.1 %

2. The percentage of increase in owners' equity is calculated as follows

= [ ( Owner’s equity in Year 2002 – Owner’s equity in 2001 ) / Owner’s equity in Year 2002] * 100

As per the information available we have

Owner’s equity in Year 2002 = $ 320,000 ; Owner’s equity in 2001 = $ 200,000

Applying the above in the formula we have

= [ ( $ 320,000 - $ 200,000 ) / $ 200,000 ]

= ( $ 120,000 / $ 200,000 )

= 0.60

= 60.0 % ( when rounded off to one decimal place )

Thus the percentage of increase in owner’s equity is = 60.0 %

The solution is option c. 60.0 %