Question

Big Hit, Inc., reported a net loss of $30 million in the current year and net income of $60 million in the prior year. Which of the following will be the percentage change in income?

A. 150%
B. 50%
C. (50%)
D. (150%)

Answer 1

The percentage change in income for Big Hit, Inc., going from a net income of $60 million to a net loss of $30 million is calculated using the formula for percentage change. The final result is a 150% change in income, which corresponds to option (D) (150%).

Step-by-step explanation:

To calculate the percentage change in income for Big Hit, Inc., we use the formula:

Percentage change in income = [(change in income)/(original income)] × 100

Here, the change in income is the difference between the net income of the prior year and the net loss of the current year, which is:

$60 million (net income) - (-$30 million) (net loss) = $60 million + $30 million = $90 million.

The original income in this scenario is the net income of the prior year, which is $60 million.

Thus, we have:

Percentage change in income = [($90 million)/($60 million)] × 100 = 1.5 × 100 = 150%

Because the result is positive and represents an increase from a positive income to a larger negative loss, the correct answer to what is the percentage change in income is: (D) (150%).