1. Which of the following is NOT part of the calculation when determining gross profit on Schedule C?

1. Gross receipts minus returns and allowances minus the cost of goods sold
2. The amount of cash and goods the proprietor receives in exchange for goods and services they sell
3. The income from gross receipts plus income from sales of scrap, interest received on customer accounts receivable, and other miscellaneous income
4. Gross receipts minus merchandise purchased during the year, less any discounts received