Traditional format income statements are prepared primarily for external reporting purposes. 

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

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