Traditional format income statements are prepared primarily for external reporting purposes.
Review Questions T/F
True
Review Questions T/F
2. In a contribution format income statement, sales minus cost of goods sold equals the gross margin.
Review Questions T/F
False
Review Questions T/F
3. In a traditional format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period.
Review Questions T/F
True
Review Questions T/F
4.Contribution format income statement is useful for external reporting purposes, it has serious limitations when used for internal purposes because it does not distinguish between fixed and variable costs.
Review Questions T/F
False
Review Questions T/F
5. In a contribution format income statement for a merchandising company, cost of goods sold is a variable cost that gets included in the “Variable expenses” portion of the income statement.
Review Questions T/F
True
Review Questions T/F
6. The traditional format income statement is used as an internal planning and decision-making tool. Its emphasis on cost behavior aids cost-volume-profit analysis, management performance appraisals, and budgeting.
Review Questions T/F
False
Review Questions M/C
7.When finished goods are sold, there is an increase in which of the following accounts?
A- Finished Goods Inventory
B- Cost of Goods Sold
C- Work-in-Process Inventory
D- Cost of Goods Manufactured
Review Questions M/C