Gross profit does not appear a. on a merchandising company income statement. b. on a service...
Question:
Gross profit does not appear:
a. on a merchandising company income statement.
b. on a service company income statement.
c. to be relevant in analyzing the operation of a merchandising company.
d. on the income statement if the periodic inventory system is used because it cannot be calculated.
Income Statement:
The income statement is a financial statement that shows how profitable a company is and summarizes revenues and expenses over the last accounting cycle. The statement will show whether revenues exceed expenses and results in a profit, or if expenses exceed revenues and results in a loss.
Answer and Explanation: 1
Gross profit does not appear b) on a service company income statement.
Gross profit is the amount of revenue generated by sales after accounting for the cost of goods sold. Service companies generate service revenue and would not have a cost of goods sold and, as a result, do not report gross profits.
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How to Calculate Gross Profit Margin: Definition & Formula
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Learn how gross profit is calculated. Explore how to calculate gross profit margin, the definition of revenue, and the difference between gross and net profit.
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