Question

Which of the following accounts would most likely appear on the income statement of a merchandise company, but NOT on the income statement of a service company?

1) Selling expenses
2) Cost of goods sold
3) Gain on sale of stock
4) Income tax expense

Answer 1

The Cost of Goods Sold is an account that appears on the income statement of a merchandise company but not on the income statement of a service company. It includes the cost of materials, labor, and overhead directly associated with the production of goods.

Step-by-step explanation:

The account that would most likely appear on the income statement of a merchandise company, but not on the income statement of a service company, is 2) Cost of goods sold. This account represents the cost of purchasing or producing the goods that the company sells. It includes the cost of raw materials, direct labor, and manufacturing overhead. Cost of goods sold (COGS) represents the direct costs associated with producing the goods that a merchandise company sells. It includes the cost of materials, labor, and overhead directly associated with the production of goods. Since service companies do not typically sell physical goods, they do not have a cost of goods sold account on their income statement.

It includes the cost of raw materials, direct labor, and manufacturing overhead. Cost of goods sold (COGS) represents the direct costs associated with producing the goods that a merchandise company sells. It includes the cost of materials, labor, and overhead directly associated with the production of goods. The other options (1) Selling expenses, (3) Gain on sale of stock, and (4) Income tax expense could appear on both merchandise and service companies' income statements, depending on the nature of their operations and transactions.