Question

When performing a horizontal analysis on an income​ statement, the percentage change in any individual item is calculated by dividing the dollar amount of the change from the base period to the current period by
A. the average of the base and the current period amounts.
B. the amount estimated for the future period.
C. the base period amount.
D. the current period amount.

Answer 1

Answer: C. the base period amount.

Explanation: While implementing a horizontal analysis on a given income statement, we compute a percentage change in any individual item by dividing the dollar amount of change from base to current  time period with the base period amount.

i.e. % Change in Individual item = $\frac{Current\ Dollar\ - Base\ Dollar }{Base \ period \ amount}$

Therefore, the correct option in this case is (c)