### How is Income from Operations determined?To calculate Income from Operations, we need to understand the formula that includes the various components:**Options:**1. **A.** Net Sales - Selling Expenses - Administrative Expenses2. **B.** Gross Profit - Cost of Goods Sold + Selling Expenses3. **C.** Net Sales - Cost of Goods Sold - Selling Expenses - Administrative Expenses4. **D.** Gross Profit + Cost of Goods Sold### Explanation:Let's break down each option to understand how Income from Operations is calculated.1. **Option A:** - **Net Sales - Selling Expenses - Administrative Expenses** - This option considers that Income from Operations can be derived by subtracting Selling and Administrative expenses from Net Sales.2. **Option B:** - **Gross Profit - Cost of Goods Sold + Selling Expenses** - This option does not follow the standard accounting practice, since it recalculates the Cost of Goods Sold after obtaining Gross Profit, which does not logically follow.3. **Option C:** - **Net Sales - Cost of Goods Sold - Selling Expenses - Administrative Expenses** - This is the correct formula for Income from Operations. Starting from Net Sales, we subtract Cost of Goods Sold (to get Gross Profit), and then further subtract Selling and Administrative expenses.4. **Option D:** - **Gross Profit + Cost of Goods Sold** - This formula does not provide the correct calculation, as it adds Cost of Goods Sold back to Gross Profit, which is not logical.By analyzing the provided options, we can determine that the correct formula for calculating Income from Operations is represented by Option C:**Net Sales - Cost of Goods Sold - Selling Expenses - Administrative Expenses**

Net sales - Cost of goods sold = Gross profit

How is Income from Operations determined? A) Net Sales - Selling Expenses - Administrative Expenses Gross Profit - Cost of Goods Sold + Selling Expenses Net Sales - Cost of Goods Sold - Selling Expenses - Administrative Expenses Gross Profit + Cost of Goods Sold

How is Income from Operations determined? A) Net Sales - Selling Expenses - Administrative Expenses Gross Profit - Cost of Goods Sold + Selling Expenses Net Sales - Cost of Goods Sold - Selling Expenses - Administrative Expenses Gross Profit + Cost of Goods Sold

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Generally, the revenue account for a merchandising business is entitled Oa. Gross Sales Ob. Sales Oc. Fees Earned Od. Gross Profit
Gross profit is A) Cost of goods sold + Opening stock B) Sales cost of goods sold C) Sales Purchases D) Net profit expenses
in a merchandising business gross profit is equal to the sales revenue minus (a) the sum of cost of goods sold and sales commissions (b) cost of goods sold (c) the sum of cost of goods sold and operating expenses (d) the sum of cost of goods sold, operating expenses and prepaid expenses
Gross profit is: The amount left over after cost of goods sold is subtracted from net sales. A.Net sales less operating expenses. B.Sales less sales discount. C.less sales discounts. D.Net sales less selling expenses
Which of the following expressions is incorrect? Gross profit - operating expenses = net income Net income + operating expenses = gross profit ● Sales revenue - cost of goods sold - operating expenses = net income ● Operating expenses - cost of goods sold = gross profit
Cost of goods sold is given by: Select one: a. Net Purchases + beginning inventory - ending inventory. b. Net purchases + ending inventory - beginning inventory. c. Beginning inventory + accounts payable - net purchases. d. Beginning inventory - net purchases + ending inventory.