On the income statement of a merchandising company, interest income and interest expense are reported:

B. As separate items of other income and expense below the net operating income or loss

Explanation:

In a Merchandising company, the main revenue stream is not from interest revenue so when income from interest is received, it is not recorded with the normal revenue so as not to overstate revenue from operations. It will instead be recorded after the net operating income in the other income and expense section.

The same goes for finance costs such interest expenses. Income tax expense is also recorded here.

b i think

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