Question

Which of the following line items will appear on the income statement of a merchandiser but not of a service​ company?A. Supplies InventoryB. Salaries ExpenseC. Depreciation ExpenseD. Cost of Goods Sold

Answer 1

Answer:

D. Cost of Goods Sold

Explanation:

The cost of goods sold or simply COGS is a numerical representation of the direct expenses incurred in manufacturing products sold to customers in a period. It is the aggregate of direct labor, direct materials, and overheads used in the production process. COGS apply to manufacturing firms and companies that handle physical goods.

The COGS is deducted from the sales revenue to give the gross profit. Calculating the COGS involves adding the purchases or goods manufactured to the beginning inventory. Ending inventory is deducted from the total to provide the COGS.  As per the formula, the COGS does not apply to the service industry.