Question

Common-size and trend percents for Rustynail Company’s sales, cost of goods sold, and expenses follow. Determine whether net income increased, decreased, or remained unchanged in this three-year period.

	Common-Size Percents			Trend Percents
	2017	2016	2015	2017	2016	2015
Sales	100.0%	100.0%	100.0%	105.4% 1	104.2%	100.0%
Cost of goods sold	63.4	61.9	59.1	113.1	109.1	100.0
Total expenses	15.3	14.8	15.1	106.8	102.1	100.0

Short answer

Net income decreased over the three years.

Step-by-step solution

Meaning of Trend Percent

Similar to even analysis,trend percentages compare to a chosen base year or period. Since they reveal changes and patterns over time, trend percentages support comparing financial accounts from different times.

Determining whether net income increased, decreased, or remained unchanged in these three years

Year	Net income percent
2015	$\mathbf{100}\mathbf{-}\mathbf{59}\mathbf{.}\mathbf{1}\mathbf{-}\mathbf{15}\mathbf{.}\mathbf{1}\mathbf{=}\mathbf{25}\mathbf{.}\mathbf{8}\mathit{\%}\mathit{o}\mathit{f}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}$
2016	$\mathbf{100}\mathbf{-}\mathbf{61}\mathbf{.}\mathbf{9}\mathbf{-}\mathbf{14}\mathbf{.}\mathbf{8}\mathbf{=}\mathbf{23}\mathbf{.}\mathbf{3}\mathit{\%}\mathit{o}\mathit{f}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}$
2017	$\mathbf{100}\mathbf{-}\mathbf{63}\mathbf{.}\mathbf{4}\mathbf{-}\mathbf{15}\mathbf{.}\mathbf{3}\mathbf{=}\mathbf{21}\mathbf{.}\mathbf{3}\mathit{\%}\mathit{o}\mathit{f}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}$

Next, if 2015 sales are assumed to be $100, then sales for 2016 are $104.20, and the sales for 2017 are $105.40. If the net income presented for the three years is applied to these amounts, the net income is:

Year	Net income
2015	$\mathit{\$}\mathbf{100}\mathbf{\times }\mathbf{25}\mathbf{.}\mathbf{8}\mathit{\$}\mathbf{=}\mathit{\$}\mathbf{25}\mathbf{.}\mathbf{80}$
2016	$\mathit{\$}\mathbf{104}\mathbf{.}\mathbf{20}\mathbf{\times }\mathbf{23}\mathbf{.}\mathbf{3}\mathit{\%}\mathbf{=}\mathit{\$}\mathbf{24}\mathbf{.}\mathbf{28}$
2017	$\mathit{\$}\mathbf{105}\mathbf{.}\mathbf{40}\mathbf{\times }\mathbf{21}\mathbf{.}\mathbf{3}\mathit{\%}\mathbf{=}\mathit{\$}\mathbf{22}\mathbf{.}\mathbf{45}$

It shows that net income decreasedover the three years.