If the adoption of a new product will reduce the sales of an existing product, then the projected sales on the pro forma statement should:
A) reflect only the sales of the new product.
B) include only the reduction amount.
C) equal the incremental increase in total sales.
D)be adjusted upward by the reduction amount.

Question

Quizplus · Accepted Answer

Pro forma statements are financial statements that are based on certain assumptions or projections. When a new product is introduced, it is likely that it will impact the sales of existing products. In such a scenario, it would be incorrect to only reflect the sales of the new product (option A) or only the reduction amount (option B). Adjusting the sales upward by the reduction amount (option D) would also not be appropriate. The best choice is to include the incremental increase in total sales (option C), which considers both the sales of the new product and the reduction in sales of existing products. This provides a more accurate projection of overall sales.

If the Adoption of a New Product Will Reduce the Sales