True or False? Q1 The income statement presents revenues, expenses, net income a

Question

True or False?

Q1 The income statement presents revenues, expenses, net income and earnings per share for an accounting period.

Q2 The statement of stockholders equity is an important link between the cash balance and the income statement.

Q3 The common size income statement expresses each income statement item as a percentage of total expenses.

Q4 Gross profit I the difference between sales and cost of goods sold.

Q5 In volatile industries such as high technology gross profit may increase or decrease significantly each year.

Q6 Operating profit margin is impacted by sales and all operating expenses except gain or loss from sale of asset.

Q7 Users of financial statements do not have to distinguish between earnings increasing due to car operations versus items such as tax rate deductions.

Q8 Two special items discounted operations and extra ordinary items are not to be disclosed separately in the income statement.

Q9 Earnings and profit are two other terms used interchangeably with income.

Q10The FIFO method of inventory generally results in matching of current costs with revenues and therefore produces high quality earning.

Explanation / Answer

1. True, The income statement presents revenues, expenses, net income and earnings per share for an accounting period.

2. False, It represents an important link between the income statement and the balance sheet.

3. False, A common-size income statement expresses all accounts as a percentage of sales

4. True,

5. False

6. True, Operating income is an accounting figure that measures the amount of profit realized from a business's operations, after deducting operating expenses such as the cost of goods sold (COGS), wages and depreciation.

7. False, Users of financial statements need to distinguish between earnings increasing due to core operations versus items such as tax rate deductions.

8. False

9. True

10. True

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