Arrange the following items in the correct order for an income statement and calculate the totals for each category: Revenue from Services: $100,000; Cost of Goods Sold: $30,000.
Understand the Problem
The question is asking to arrange items in the correct order for GHI Services' income statement and calculate totals for each category to find the net income. It indicates a need for accounting knowledge to structure the statement correctly.
Answer
The Gross Profit is $70,000.
Answer for screen readers
The total Gross Profit is $70,000.
Steps to Solve
- List Revenue and COGS
Start with the items provided:
- Revenue from Services: $100,000
- Cost of Goods Sold (COGS): $30,000
- Calculate Gross Profit
To find the gross profit, subtract the COGS from the revenue.
The formula is: $$ \text{Gross Profit} = \text{Revenue} - \text{COGS} $$
Plug in the values: $$ \text{Gross Profit} = 100,000 - 30,000 $$
- Calculate the Total Gross Profit
Perform the subtraction: $$ \text{Gross Profit} = 70,000 $$
- Fill in the Income Statement
Now, place the total in the income statement:
- Revenue from Services: $100,000
- Cost of Goods Sold: $30,000
- Gross Profit (to be filled in as 1): $70,000
The total Gross Profit is $70,000.
More Information
Gross profit is a key indicator of financial performance, showing how much money remains after covering direct costs associated with producing goods or services.
Tips
- Forgetting to subtract COGS from revenue to calculate gross profit. Always ensure to perform this key subtraction to find the correct figures.
- Placing items in the wrong order on the income statement. Remember, revenue comes first, followed by expenses like COGS.
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