Chapter 1, Problem 37DQ

1.1.3 accounting .

Assume the following information

The addition of the cost of goods sold (COGS) and gross profit is the main way that a merchandising company's income statement differs from that of a service organization.  Since a merchandising business makes their money by selling material goods, sales revenue, COGS, and gross profit before operating expenditures are subtracted which are all included in its income statement.  A service company, on the other hand, does not have a COGS section because they have no inventory involved but instead generates their income through the delivery of services (Weygandt, Kimmel, & Kieso, 2022). The income statement of a merchandising company will usually have only a single-step or could have a multi-step style, with the multi-step clearly separating the net income from the operational income and gross profit.  This difference is important because COGS is a major part of financial reporting for merchandising organizations, because it has a direct impact on profitability and financial analysis…