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A merchandiser reports gross profit of $600 and total operating expenses of $200. What is its net income (profit for the period)?
A$800
B$400
C$600
D$200
Answer & Solution
Correct answer: B. $400
1. Net Income = Gross Profit - Operating Expenses.
2. Net Income = $600 - $200 = $400.
3. $800 wrongly adds the expenses to gross profit.
4. $600 ignores operating expenses; $200 just repeats the expense figure.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.2 "Merchandising Income Statement", p.93_