Final answer:
The income statement that separates the cost of goods sold is called the multi-step income statement.
Step-by-step explanation:
The income statement that separates the cost of goods sold is called the multi-step income statement. This statement is commonly used by businesses to calculate their gross profit. It separates the cost of goods sold from other operating expenses, allowing the business to analyze its profitability in a more detailed manner.
In a multi-step income statement, the cost of goods sold is deducted separately from the net sales. The resulting figure is the gross profit. This statement also includes other revenue and expense categories, such as operating expenses, interest income, and taxes. By separating the cost of goods sold, businesses can have a clearer understanding of their profitability.