Which of the following statements about gross profit is correct?
A)Gross profit = Net sales − Cost of goods sold.
B)Gross profit is recorded by a credit to the Gross Profit account.
C)A company sells $10,000 of goods.If the gross profit percentage is 32%,net income would be $3,200.
D)If net sales are $100 and cost of goods sold is $50 then the gross profit percentage is 100%.

Question

Quizplus · Accepted Answer

Gross profit is a subtotal on the multistep income statement;it is not the name of an account.
Gross Profit = Net sales − Cost of goods sold
Gross profit percentage = [(Net sales − Cost of goods sold ÷ Net sales)] × 100
= [($100 − $50)÷ $100] × 100 = 50% (rather than 100%).

Which of the Following Statements About Gross Profit Is Correct