Question

If total current assets are $140,000 at the end of Year 1, increase by $50,000 by the end of Year 2, and increase by $50,000 in Year 3, the percentage increase over the preceding year is less in Year 3 than in Year 2.

Answer 1

Answer:

True

Explanation:

As the assets increase by $50,000 in year 2 on the basis of $140,000

The percentage increase = $50,000/$140,000 = 35.71%

In the year 3, the basis will be $140,000 + $50,000 (increase in year 2) = $190,000

Thus, in the year 3 the percentage increase in assets = $50,000/$190,000 = 26.32%

This clearly shows that the percentage increase is more in Year 2 than year 3, because the increase value is same but the basis has increased for Year 3, which is in denominator.