Question

The income statement for a merchandising company presents two amounts not shown on a service company income statement: cost of goods sold (cogs) and gross profit.

a. True
b. False

Answer 1

The statement is true; merchandising companies have COGS and gross profit on their income statements to account for the cost and profitability of tangible goods sold.

Step-by-step explanation:

The statement that an income statement for a merchandising company presents two amounts not shown on a service company income statement, which are cost of goods sold (COGS) and gross profit, is true. Merchandising companies sell tangible goods and therefore must account for the cost of acquiring or manufacturing these goods. This cost is known as COGS. After subtracting COGS from revenue, we arrive at the gross profit, which indicates the profitability of the company's core business operations before accounting for other expenses.