Why are inventories included in the computation of net income?
A) To determine cost of goods sold.
B) To determine sales revenue.
C) To determine merchandise returns.
D) Inventories are not included in the computation of net income.

Question

Quizplus · Accepted Answer

Inventories are included in the computation of net income to determine cost of goods sold. Cost of goods sold is necessary to calculate gross profit, which is subtracted from total revenue to arrive at net income.

Why Are Inventories Included in the Computation of Net Income