Final answer:
The statement is false because the Cost of Goods Sold (COGS) is relevant to merchandising firms that sell physical goods and include it on their income statements, while service firms do not have a COGS entry and instead record costs related to service delivery.
Step-by-step explanation:
The statement "Cost of goods sold appears on the income statement of a service firm but not a merchandising firm" is false. In accounting, the cost of goods sold (COGS) is an entry on the income statement that represents the direct costs attributable to the production of the goods sold by a company. This term applies primarily to merchandising firms, which are companies that purchase goods at a wholesale price and resell them at a retail price.
Merchandising firms indeed include COGS in their income statements as it is essential for calculating gross profit. On the other hand, service firms,thath sell services rather than physical goods, typically do not have a COGS entry. Instead, service firms have a cost of services, which may include direct labor costs, materials, and overhead directly tied to service delivery.