Chapter 10 Financial Statements and Clos

Chapter 10 – Financial Statements and Closing Entries for a Merchandising Business
TRUE/FALSE
1. The income statement is prepared before other financial statements.
ANS: T PTS: 1 OBJ: 1
2. The statement of owner’s equity is the last financial statement prepared.
ANS: F PTS: 1 OBJ: 1
3. The balance sheet lists the firm’s assets, liabilities, and owner’s equity as of a certain date.
4. The statement of owner’s equity shows the changes in the owner’s equity as of a certain date.
5. The Cost of Goods Sold section appears after the Operating Expenses section on a classified
income statement.
6. Gross profit is the profit before subtracting the operating expenses of the business.
7. Net sales is obtained by subtracting the amount of sales discounts and sales returns and allowances
from sales.
8. Gross profit is obtained by subtracting operating expenses from net sales.
9. Determining the cost of goods sold includes calculation of the net purchases.
10. The ending merchandise inventory is subtracted from the goods available for sale to obtain the
cost of goods sold.
© Paradigm Publishing, Inc. 1

11. Freight In would be subtracted from purchases to obtain the net purchases.
12. Interest expense is shown in the Operating Expenses section of a classified income statement.
13. The net income figure from the income statement is entered on the statement of owner’s equity
as a necessary part of updating the owner’s capital.
14. Current assets are listed on the balance sheet according to their size, with the largest monetary
balance listed first.
15. Plant assets are assets expected to be used in the business for more than one year.
16. Long-term liabilities are debts that will not come due for payment until at least 90 days after
preparation of the balance sheet.
17. Salaries payable and accounts payable are common examples of long-term liabilities.
18. The current ratio is the ratio of current assets to current liabilities.
19. Adjustments that appear on the work sheet must be journalized and then posted to the general
ledger.
20. Closing entries are dated as of the first day of the accounting period.
21. The Sales account, Purchases Discounts account, and Sales Discounts account are all debited in the
closing process.

22. The Purchases account, Sales Returns and Allowances account, and Sales Discounts account are all
credited in the closing process.
23. Once sdjustments for inventory have beeen posted and after the revenue and expenses have been
closed into the Income Summary account, the remaining balance represents either a net income or
a net loss.
24. The Income Summary account is involved in the adjusting entries for beginning and ending
merchandise inventory.
25. Net income is closed to the owner’s capital account as part of the closing process.
26. The balance in the owner’s drawing account is closed to the owner’s capital account as part of the
adjusting process.
27. The only accounts appearing on the post-closing trial balance are the permanent accounts, as the
temporary accounts have been closed.
28. The balance in the owner’s capital account appearing on the post-closing trial balance will likely
be the same as the prior beginning balance in the owner’s capital account.
29. The owner’s drawing account will appear on the post-closing trial balance.
30. An accrued expense occurs because the accounting period ends before the time the expense is due
for payment.

MULTIPLE CHOICE
1. Which of the following is not part of the Revenue section of the classified income statement?
a. Gross sales c. Purchases discounts
b. Sales returns and allowances d. Net sales
ANS: C PTS: 1 OBJ: 1
2. Below is selected information regarding the inventory and sales activities for Jack’s Widgets and
Wonders for the fiscal year.
Beginning Inventory $ 3,200 Gross Sales $68,500

Net Purchases 29,800 Sales Discounts 410
Ending Inventory 2,200 Sales Returns and Allowances 2,190
Net sales for the year is
a. $71,100. c. $65,900.
b. $68,900. d. $63,700.

Cost of goods sold for the year is
a. $24,400. c. $28,800.
b. $25,410. d. $30,800.
ANS: D PTS: 1 OBJ: 1


Gross profit for the year is
a. $35,100. c. $43,490.
b. $32,900. d. $46,700.
ANS: A PTS: 1 OBJ: 1
5. Which of the following is not used in the calculation of net purchases?
a. Purchase returns c. Freight in
b. Beginning inventory d. Purchase discounts
ANS: B PTS: 1 OBJ: 1
6. The information below pertains to selected information regarding the Modoc Blanket Company’s
inventory accounts for the fiscal year.
Beginning Inventory $ 1,600 Purchases Discounts $ 500

Purchases 84,000 Freight In 300
Purchases Returns and 3,200 Ending Inventory 900
Allowances
Net purchases for the fiscal year were
a. $87,700. c. $82,200.
b. $88,000. d. $80,600.

7. The information below pertains to selected information regarding the Modoc Blanket Company’s
inventory accounts for the fiscal year.
Beginning Inventory $ 1,600 Purchases Discounts $ 500

Purchases 84,000 Freight In 300
Purchases Returns and 3,200 Ending Inventory 900
Allowances
Cost of goods sold for the 2002 fiscal year is
a. $80,600. c. $81,300.
b. $81,500. d. $82,200.
8. The calculation for gross profit is
a. Gross Sales – Net Sales.
b. Net Sales – Cost of Goods Sold.
c. Gross Sales – Operating Expenses.
d. Cost of Goods Sold – Operating Expenses.
9. Operating Expenses can be broken down into
a. selling expenses and general or administrative expenses.
b. cost of goods sold and general expenses.
c. miscellaneous expenses and income taxes.
d. general expenses and interest expenses.
10. Which of the following would be considered a selling expense?
a. Cost of Goods Sold c. Interest Expense
b. Sales Discounts d. Depreciation Expense—Display Fixtures

11. Listed below are selected account balances for G. Gill Apparel Stores for the fiscal year ending
January 31, 2008.
Advertising Expense $ 750

Cost of Goods Sold 82,500
Depr.—Exp. Store Equipment 1,800
Depr.—Exp. Office Equipment 1,200
General Insurance Expense 600
Interest Expense 1,750
Merchandise Inventory 15,300
Net Sales 175,500
Office Salaries Expense 18,000
Office Supplies Expense 250
Rent Expense 3,600
Selling Salaries Expense 45,000
Store Supplies Expense 800
Utilities Expense 2,400
From the accounts listed above, determine the selling expense for the fiscal year.
a. $49,400 c. $47,600
b. $48,350 d. $63,700
January 31, 2008.

Net Sales 175,500
Rent Expense 3,600
From the accounts listed above, determine the administrative expenses for the fiscal year.
a. $26,050 c. $28,400
b. $27,800 d. $22,450

January 31, 2008.

Net Sales 175,500
Rent Expense 3,600
What are the total operating expenses for G. Gill for the fiscal year?
a. $93,000 c. $74,400
b. $77,700 d. $70,150
January 31, 2008.

Net Sales 175,500
Rent Expense 3,600
What is the income from operations for the fiscal year?
a. $ 74,400 c. $ 18,600
b. $101,100 d. $ 16,850

15. Watanabe Cake and Candies was charged $3,750 in interest for a loan from a bank. This amount
will be shown on the income statement as
a. Interest Income in the Administrative section.
b. Interest Expense in the Selling Expenses section.
c. Interest Expense in the Other Income and Expenses section.
d. Interest Income in the Revenue section.
16. Neal Construction sold equipment that was no longer being used. How will this be reported on the
income statement?
a. As Other Income in the Other Income and Expenses section.
b. As a reduction in Depreciation Expense in Operating Expenses section.
c. As Miscellaneous Sales in the Revenue section.
d. It would only show up on the balance sheet as an increase to Cash.
17. Listed below is selected information from the account balances for Kini’s Asian Sauces for the
fiscal year ended December 31, 2007.
Cash $ 3,500 Owner’s Drawing $

1,900
Net Income 8,600 Owner’s Capital, January 1
16,250
What amount will be reported in the statement of owner’s equity at December 31, 2007?
a. $26,750 c. $22,950
b. $26,450 d. $14,350

18. From the following selected data from Altadena Hobby Shop’s Classified Balance Sheet,
determine both the current and total assets.
Cash $9,500 Other Current Assets $ 36

Accounts Receivable 820 Equipment 820
Inventory 400 Accumulated Depreciation 370
a. Current Assets are $9,500, and Total Assets are $11,946.
b. Current Assets are $10,756, and Total Assets are $11,206.
c. Current Assets are $10,356, and Total Assets are $11,576.
d. Current Assets are $10,720, and Total Assets are $11,206.
19. On the classified balance sheet, current assets are listed in what order?
a. Alphabetically c. According to stability
b. Largest to smallest d. According to liquidity
20. The current ratio is used to analyze a company’s
a. ability to pay its current obligations.
b. ability to generate a profit in the current year.
c. current ability to continue in business.
d. current gross profit percentage.
21. Listed below is selected information from the classified balance sheet for Artz Company.
Cash $21,500 Accounts Payable $ 11,409

Accounts Receivable 2,191 Salaries Payable 5,575
Inventory 5,514 Other Current Liabilities 8,676
Property, Plant, and 3,346 Long-Term Notes 11,500
Equipment Payable
What is the working capital for Artz Company?
a. $10,091 c. $3,545
b. $6,891 d. $1,377

22. Listed below is selected information from the classified balance sheet for Artz Company.
Cash $21,500 Accounts Payable $11,409

Accounts Receivable 2,191 Salaries Payable 5,575
Inventory 5,514 Other Current Liabilities 8,676
Property, Plant, and Equipment 3,346 Long-Term Notes 11,500
Payable
What is Artz Company’s current ratio (rounded to two decimal places)?
a. 1.88 to 1 c. 1.72 to 1
b. 1.14 to 1 d. 1.03 to 1
23. A classified income statement includes all of the following sections except
a. Other Income and Expenses. c. Owner’s Equity.
b. Gross Profit. d. Cost of Goods Sold.
24. Cost of goods sold is equal to
a. ending merchandise inventory plus beginning merchandise inventory minus net

purchases.
b. beginning merchandise inventory minus net purchases plus ending merchandise

inventory.
c. beginning merchandise inventory plus net purchases minus ending merchandise

inventory.
d. ending merchandise inventory plus net purchases minus beginning merchandise

inventory.
25. Net purchases appear in the
a. Owner’s Equity section of the balance sheet.
b. Revenue section of the income statement.
c. Current Assets section of the balance sheet.
d. Cost of Goods Sold section of the income statement.

26. If purchases for the current period are $500, purchases returns and allowances are $50, and freight
in is $30, net purchases amount to
a. $500. c. $420.
b. $550. d. $480.
27. If beginning merchandise inventory is $20, net purchases for the current period are $50, and
ending merchandise inventory is $10, cost of goods sold is
a. $50. c. $20.
b. $60. d. $70.
28. Which of the following is not considered to be a general expense under the Operating Expenses
section of the income statement?
a. Insurance Expense c. Depreciation Expense—Office Equipment
b. Office Salaries Expense d. Interest Expense
29. Which of the following is not considered to be a selling expense under the Operating Expenses
section of the income statement?
a. Store Supplies Expense c. Sales Salaries Expense
b. Sales Discounts d. Advertising Expense
30. Current assets typically include
a. store equipment. c. accounts payable.
b. land. d. accounts receivable.

31. Under which section of the balance sheet would the Accumulated Depreciation—Office Equipment
account appear?
a. Current Assets c. Plant Assets
b. Current Liabilities d. Owner’s Equity
32. Gross profit is obtained by
a. adding net sales and the cost of goods sold.
b. adding the selling expenses and the general expenses.
c. subtracting the cost of goods sold from the net sales.
d. subtracting the operating expenses from the net sales.
33. Net sales is obtained by
a. adding sales returns and allowances and sales discounts to operating expenses.
b. adding sales discounts to net purchases.
c. subtracting sales returns and allowances and sales discounts from sales.
d. adding sales discounts to sales.
34. All of the following are operating expenses except
a. Depreciation Expense—Store Equipment.
b. Insurance Expense.
c. Sales Discounts.
d. Salaries Expense.

35. Which of the following shows the correct order for preparation of the financial statements at the
end of the accounting period?
a. Statement of owner’s equity, balance sheet, income statement
b. Income statement, statement of owner’s equity, balance sheet
c. Income statement, balance sheet, statement of owner’s equity
d. Balance sheet, income statement, statement of owner’s equity
36. Working capital is total
a. current assets minus total current liabilities.
b. current assets plus total current liabilities.
c. expenses plus revenues.
d. liabilities minus total assets.
37. Current ratios of four companies are provided below. Select the current ratio of the company that
is in the best position to meet its short-term obligations.
a. 1.31 to 1 c. 2.3 to 1
b. 2.1 to 1 d. 1.4 to 1
38. Which of the following equations is true?
a. Sales Returns and Allowances + Sales Discounts = Net Sales
b. Purchases + Purchase Returns and Allowances = Net Purchases
c. Net Sales + Cost of Goods Sold = Gross Profit
d. Net Sales + Sales Discounts + Sales Returns and Allowances = Sales
39. The Income Summary account is closed to
a. Expenses. c. Owner’s Drawing.
b. Revenue. d. Owner’s Capital.

40. The Sales account is
a. credited during the closing process.
b. debited during the closing process.
c. not closed at the end of the accounting period.
d. debited during the adjusting process.
41. During the closing process, the Sales Discounts and Purchases Discounts accounts are
a. credited and debited, respectively. c. debited and debited, respectively.
b. debited and credited, respectively. d. credited and credited, respectively.
42. Beginning and ending merchandise inventory are
a. debited and credited, respectively, during the adjusting process.
b. credited and debited, respectively, during the closing process.
c. debited and credited, respectively, during the closing process.
d. credited and debited, respectively, during the adjusting process.
43. The entry to close the Sales Discounts account involves a debit to
a. Sales Discounts and a credit to Sales.
b. Sales and a credit to Sales Discounts.
c. Sales Discounts and a credit to Income Summary.
d. Income Summary and a credit to Sales Discounts.

44. The entry to close the owner’s drawing account involves a debit to the
a. Income Summary account and a credit to the owner’s drawing account.
b. owner’s drawing account and a credit to the owner’s capital account.
c. owner’s capital account and a credit to the owner’s drawing account.
d. owner’s drawing account and a credit to the Income Summary account.
45. Which of the following accounts is not closed?
a. Purchases c. Accumulated Depreciation
b. Sales Discounts d. Depreciation Expense
46. A debit balance in the owner’s drawing account on the post-closing trial balance would indicate
that
a. the company made a profit for the year.
b. an error was made in the closing process.
c. the company had a loss for the year.
d. the closing process is complete.
47. Which of the following accounts will not appear on a post-closing trial balance?
a. Sales c. Land
b. Store Supplies d. Accounts Payable

48. Frank’s Custom Fencing accrued $12,000 of wages on November 30, the end of the accounting
period. On December 4, $20,000 in wages were paid. If reversing entries are used, what is the
entry that Frank’s Custom Fencing made on December 1?
a. Debit Salaries Expense $8,000; credit Salaries Payable $8,000
b. Debit Salaries Payable $12,000; credit Cash $12,000
c. Debit Salaries Expense $20,000; credit Salaries Payable $20,000
d. Debit Salaries Payable $12,000; credit Salaries Expense $12,000
49. The reversing entry for accrued salaries of $500 involves a debit to
a. Income Summary and a credit to Salaries Expense for $500.
b. Salaries Expense and a credit to Salaries Payable for $500.
c. Salaries Payable and a credit to Cash for $500.
d. Salaries Payable and a credit to Salaries Expense for $500.
50. Reversing entries are
a. required entries.
b. identical to the adjusting entries made to record accrued expenses.
c. entries that complicate the bookkeeping for transactions that involve accrued
expenses.
d. made on the first day of the new accounting period.
SHORT ANSWER
1. Where does Interest Expense appear on the income statement?
ANS:
Interest Expense appears at the bottom of the income statement in the Other Expenses section.
PTS: 1 OBJ: 1

2. Why is Interest Expense not included in the calculation of Income from Operations?
ANS:
Interest expense is considered the cost of borrowing money, not a cost of operating the business.
PTS: 1 OBJ: 1
3. What is gross profit?
ANS:
Gross profit is calculated as Net Sales less Cost of Goods Sold.
PTS: 1 OBJ: 1
4. What is the difference between gross profit and net income?
ANS:
Gross profit is Net Sales less Cost of Goods Sold. Net income is Gross Profit less the operating
expenses of the business (plus or minus any other income or other expenses).
PTS: 1 OBJ: 1
5. What is a current asset?
ANS:
Currents assets consist of cash and assets that will be sold, converted to cash, or used up within one
year. Examples are accounts receivable, supplies, and prepaid insurance.
PTS: 1 OBJ: 1
6. What is a plant asset?
ANS:
Plant assets are assets that are expected to be used in the business for more than one year.
PTS: 1 OBJ: 1
7. What is working capital?
ANS:
Working capital is the amount by which current assets exceed current liabilities.
PTS: 1 OBJ: 1
8. In the closing entry that closes revenue (sales), what other accounts are also closed?
ANS:
Along with Sales, we close any other income statement accounts that have a credit balance.
PTS: 1 OBJ: 2

9. In a service business, the second closing entry is made to close expenses. How does this entry
differ in a merchandising business?
ANS:
In a merchandising business, this entry will also close the other income statement accounts that
have a debit balance. This will include purchases, sales returns and allowances, and sales discounts.
PTS: 1 OBJ: 2
10. What account is credited when we adjust for accrued salaries?
ANS:
We credit Salaries Payable when adjusting for accrued salaries.
PTS: 1 OBJ: 2
PROBLEM
1. Prepare the Cost of Goods Sold section of a classified income statement for Whites’ Automotive
Sales for the year ended December 31, 20X3, based on the following information:
ANS:
PTS: 1 OBJ: 1

2. Prepare a classified income statement for Whittier’s Office Equipment for the year ended
December 31, 20X1, using the following condensed account balances:
ANS:
PTS: 1 OBJ: 1

3. Prepare a classified balance sheet for Mervin’s Auto Parts as of December 31, 20X2, based on the
following account balances:
ANS:
PTS: 1 OBJ: 1

4. Prepare a statement of owner’s equity for Charlie’s Shoes for the year ended December 31, 20XX,
based on the following information:
ANS:
PTS: 1 OBJ: 1
5. For each independent situation below, compute the missing numbers.
ANS:
PTS: 1 OBJ: 1

6. Based on the following balances, calculate (a) the working capital and (b) the current ratio.
a. Working capital = ___________________________
b. Current ratio = ___________________________
ANS:
PTS: 1 OBJ: NA

7. Prepare adjusting entries in general journal form for Farmington Fabrics for the year ended
December 31, 20X3, based on the following data:
a. Salaries accrued at year-end, $1,350.

b. Ending merchandise inventory, $12,750.
c. Insurance expired during the current year, $2,650.
d. Depreciation on the office equipment for the current year, $3,000.
e. Beginning merchandise inventory,$17,100.
f. Depreciation on the store equipment for the current year, $6,000.
ANS:
General Journal Page 1

Date Account Title Debit Credit
Adjusting Entries
a. 20X3
Dec. 31 Salaries Expense 1,350
Salaries Payable 1,350
b. 31 Merchandise Inventory 12,750

Income Summary 12,750
c. 31 Insurance Expense 2,650

Prepaid Insurance 2,650
d. 31 Depr. Exp.—Office Equipment 3,000

Accum. Depr.—Office Equipment 3,000
e. 31 Income Summary 17,100

f. 31 Depr. Exp.—Store Equipment 6,000

Accum. Depr.—Store Equipment 6,000
PTS: 1 OBJ: 2

8. Prepare closing entries in general journal form for Silkie’s Hosiery as of December 31, 20XX,
using the following account balances. Assume that the Income Summary account has a credit
balance of $10,000 after adjusting for the beginning and ending merchandise inventory.
ANS:
General Journal Page 1

Date Account Title Debit Credit
Closing Entries
20X3
Dec. 31 Sales 952,000
Purchases Returns and Allowances 16,500
Purchases Discounts 19,500
Income Summary 988,000
31 Income Summary 902,000

Purchases 490,000
Sales Returns and Allowances 25,000
Sales Discounts 32,000
Sales Salaries Expense 120,000
Depreciation Expense—Equipment 39,000
Rent Expense 36,000
Insurance Expense 9,000
31 Income Summary 96,000

Jasmine Turner, Capital 96,000
31 Jasmine Turner, Capital 10,000

Jasmine Turner, Drawing 10,000
PTS: 1 OBJ: 2

9. Prepare a post-closing trial balance for Samantha’s Jewelry as of December 31, 20X2, using the
following account balances. You will need to compute the amount of net income for the current
year in order to determine the ending balance of the owner’s capital account.
ANS:

PTS: 1 OBJ: 3
10. Prepare the adjusting entry and the reversing entry for $850 of accrued salaries for the year ended
December 31, 20X1.
ANS:
PTS: 1 OBJ: 4
ESSAY
1. Assume that you are teaching an accounting course. At one class session, you hear the students
using the terms gross profit and net income interchangeably. You make a note to talk to them
about the difference between these terms during the next class session. How will you explain the
difference between the two terms?
ANS:
Gross profit is the difference between net sales and cost of goods sold. Net income, however, is the
difference between gross profit and operating expenses plus other income (if any) and less other
expenses (if any).
PTS: 1 OBJ: 1
2. You are the owner of a business. Your accountant tells you that your working capital is $10,000.
Is this good or bad? Explain.
ANS:
Knowing that we have $10,000 in working capital does not give us a full measure of the firm’s
liquidity. To more accurately measure liquidity, we need to know more. We need to calculate the
current ratio.
For example, if we have $100,000 in current assets and $90,000 in current liabilities, we would
have $10,000 in working capital. However, our current ratio would only be 1.11 to 1 (100,000 ÷
90,000). This means that we may not be able to meet our short-term obligations.
But suppose that we have $20,000 in current assets and $10,000 in current liabilities. We
would still have $10,000 in working capital. However, our current ratio would be 2 to 1 (20,000 ÷
10,000). This would indicate that we are in a very good position to meet our short-term
obligations.
We have $10,000 in working capital in both examples above. However, as illustrated, we need
to know the ratio between current assets and current liabilities in order to evaluate liquidity. This
is why we use the current ratio.
PTS: 1 OBJ: 1

3. Assume that the business where you work, Finley Company, was recently flooded. Unfortunately,
most of the recovered accounting records were not legible. However, you did find the following
general journal entries for 20X1. Is it possible to construct an income statement from this
information? Why or why not?
ANS:
The general journal entries recovered are the closing entries for the accounting period. These
entries show the revenue, costs, and expenses as well as net income for the period. A simple
income statement can be constructed if the detail of the Cost of Goods Sold section is not needed.
Although the third closing entry makes it possible for us to calculate what the balance in Income
Summary must have been after adjusting for inventories, this entry alone does not give us a value
for beginning and ending inventory. We will need to know the beginning and ending balances in
merchandise inventory to prepare a detailed Cost of Good Sold section of the income statement.
If only the ending inventory balance is available, the beginning inventory can be derived.
PTS: 1 OBJ: 2
4. Suppose that the junior bookkeeper in your office sends you an e-mail asking if it is necessary to
reverse adjusting entries. She says that she feels it is an extra step that is just a waste of time. How
would you answer her question?
ANS:
Reversing entries are not necessary, but they can be helpful. For example, reversing the adjusting
entries for accrued expenses allows the accountant to make routine entries when the accrued
expenses are paid in the next accounting period. Even though reversing entries take a little more
time now, they will save time later because the accountant does not have to look back at the
previous period to see how much of a payment relates to that period and how much relates to the
current period.
PTS: 1 OBJ: 4

5. Assume that you are an accountant for a small software company. One day, you are planning to
have lunch with a friend who works at another software company. She comes to your office just as
you are completing financial statements for your firm. She tells you that she is curious about how
your firm is doing and asks to see the financial statements. How should you respond to this
request?
ANS:
Anyone who does accounting work for a business has a responsibility to keep its financial
information confidential. It is unethical to show private records and reports to outsiders.
PTS: 1 OBJ: NA

Chapter 10 Financial Statements and Clos

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Chapter 10 Financial Statements and Clos

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Chapter 10 – Financial Statements and Closing Entries for a Merchandising Business

1. The income statement is prepared before other financial statements.

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2. The statement of owner’s equity is the last financial statement prepared.

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8. Gross profit is obtained by subtracting operating expenses from net sales.

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© Paradigm Publishing, Inc. 3

a. Gross sales c. Purchases discounts

b. Sales returns and allowances d. Net sales

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Beginning Inventory $ 3,200 Gross Sales $68,500

Net sales for the year is

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Beginning Inventory $ 3,200 Gross Sales $68,500

Cost of goods sold for the year is

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© Paradigm Publishing, Inc. 4

Beginning Inventory $ 3,200 Gross Sales $68,500

Gross profit for the year is

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5. Which of the following is not used in the calculation of net purchases?

a. Purchase returns c. Freight in

b. Beginning inventory d. Purchase discounts

ANS: B PTS: 1 OBJ: 1

Beginning Inventory $ 1,600 Purchases Discounts $ 500

Net purchases for the fiscal year were

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© Paradigm Publishing, Inc. 5

Beginning Inventory $ 1,600 Purchases Discounts $ 500

Cost of goods sold for the 2002 fiscal year is

ANS: C PTS: 1 OBJ: 1

8. The calculation for gross profit is

a. Gross Sales – Net Sales.