On the income statement, the ending merchandise inventory is deducted from the cost of goods available for sale to yield income from operations.

Question

Quizplus · Accepted Answer

The ending merchandise inventory is not deducted from the cost of goods available for sale to yield income from operations. Instead, it is subtracted from the cost of goods available for sale to determine the cost of goods sold, which is then used to calculate gross profit by subtracting it from net sales. Income from operations is calculated by subtracting operating expenses from gross profit.

On the Income Statement, the Ending Merchandise Inventory Is Deducted