In preparing projected statements, to project cost of goods sold and the expense items in the income statement, which of these methods is recommended?
A) Determining the net worth method
B) What a firm earns method
C) Percentage-of-sales method
D) Price-earnings ratio method
E) Outstanding shares method

Question

Quizplus · Accepted Answer

The percentage-of-sales method is recommended for projecting cost of goods sold and expense items in the income statement. This method uses historical data to determine the percentage of sales that should be allocated to each cost and expense item, and then applies those percentages to the projected sales for the future period. This method is considered reliable and accurate, as it takes into account the company's historical trends and allows for adjustments based on expected changes in the business environment.

In Preparing Projected Statements, to Project Cost of Goods Sold