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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
Publisher: South-Western College Pub
ISBN: 9781337280570
BuyFind

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
Publisher: South-Western College Pub
ISBN: 9781337280570

Solutions

Chapter
Section
Chapter 12, Problem 1QY
Textbook Problem

What is the term used for the profit on a sale before any operating expenses have been deducted?

  1. a. Net Income
  2. b. Net Profit
  3. c. Gross Profit
  4. d. Gain on Sale
  5. e. All of the above

Expert Solution
To determine

Find the correct option that indicates the correct term for the given explanation.

Answer to Problem 1QY

The correct answer is option (c).

Explanation of Solution

Gross profit: Gross profit is the amount of revenue earned from goods sold over the costs incurred for the goods sold.

Formula to compute gross profit:

Gross profit = Net sales – Cost of goods sold

Justification for correct answer: Gross profit is the difference between net sales and cost of goods sold. The amount of cost of merchandise sold during a certain period is referred to as cost of goods sold. Cost of goods sold does not include any operating expenses. So, gross profit is the revenue generated from sales over the cost of goods sold, before any operating expenses are incurred. Hence, option (c) is correct.

Justification for incorrect answers:

  • Option (a) is incorrect because net income is the difference between total revenues and total expenses of a business.
  • Option (b) is incorrect because net income or net profit is the difference between total revenues and total expenses of a business.
  • Option (d) is incorrect because gain on sale is the amount realized on sale transaction, when the sale proceeds is more than the book value of the asset on the date of sale.
  • Option (e) is incorrect because option (c) is the correct answer and the phrase ‘all of the above’ is incorrect.
Conclusion

Therefore, option (c) is correct answer.

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Chapter 12 Solutions

College Accounting (Book Only): A Career Approach
Show all chapter solutions
Ch. 12 - Explain the calculation of net sales and net...Ch. 12 - In the closing procedure, what happens to (a)...Ch. 12 - What are the rules for recognizing whether an...Ch. 12 - What two measures are used to determine whether a...Ch. 12 - Calculate the missing items in the following:Ch. 12 - Using the following information, prepare the Cost...Ch. 12 - Identify each of the following items relating to...Ch. 12 - The Income Statement columns of the August 31...Ch. 12 - Identify each of the following items relating to...Ch. 12 - On December 31, 20--, the following selected...Ch. 12 - From the following T accounts, journalize the...Ch. 12 - From the following information, journalize the...Ch. 12 - A partial work sheet for The Fan Shop is presented...Ch. 12 - Here is the partial work sheet for Eckland Stereo....Ch. 12 - The following partial work sheet covers the...Ch. 12 - The following accounts appear in the ledger of...Ch. 12 - A partial work sheet for McKnight Music Store is...Ch. 12 - Here is the partial work sheet for Meyer Mountain...Ch. 12 - The following partial work sheet covers the...Ch. 12 - The following accounts appear in the ledger of...Ch. 12 - Costco is the largest chain of membership...Ch. 12 - A music store sells new instruments. The store...Ch. 12 - You are an owner/bookkeeper in a country whose...Ch. 12 - Marty is an accountant. Sometimes printouts of...Ch. 12 - What if the freight charges on a new desk for the...Ch. 12 - It is now August 31. You have journalized and...

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