GHI Services is preparing its income statement. Arrange the following items in the correct order on the income statement and calculate the totals for each category: Revenue from Se... GHI Services is preparing its income statement. Arrange the following items in the correct order on the income statement and calculate the totals for each category: Revenue from Services: $100,000, Gross Profit: $70,000, Total Operating Expenses: $15,000, Total Cost of Goods Sold: $30,000, Net Income: $55,000.
Understand the Problem
The question is asking how to structure an income statement for GHI Services by organizing financial data correctly and calculating the totals for each category to determine net income.
Answer
``` Income Statement As of December 1, 20XX Revenue from Services: $100,000 Cost of Goods Sold: $30,000 Gross Profit: $70,000 Total Operating Expenses: $15,000 Net Income: $55,000 ```
Answer for screen readers
Income Statement
As of December 1, 20XX
Revenue from Services: $100,000
Cost of Goods Sold: $30,000
Gross Profit: $70,000
Total Operating Expenses: $15,000
Net Income: $55,000
Steps to Solve
- Identify the structure of an income statement
An income statement generally includes the following main sections: Revenues, Cost of Goods Sold (COGS), Gross Profit, Operating Expenses, and Net Income.
- List the provided financial information
From the problem, we have:
- Revenue from Services: $100,000
- Cost of Goods Sold: $30,000
- Gross Profit: $70,000
- Total Operating Expenses: $15,000
- Net Income: $55,000
- Calculate Gross Profit
Gross Profit is calculated as:
$$ \text{Gross Profit} = \text{Revenue} - \text{COGS} $$
So, for verification:
$$ 100,000 - 30,000 = 70,000 $$
- Calculate Net Income
Net Income is calculated as:
$$ \text{Net Income} = \text{Gross Profit} - \text{Total Operating Expenses} $$
So, for verification:
$$ 70,000 - 15,000 = 55,000 $$
- Organize the income statement in proper order
The correct order for the income statement will be:
- Revenue from Services
- Cost of Goods Sold
- Gross Profit
- Total Operating Expenses
- Net Income
- Fill in the income statement section
The section for income statement can be filled in as follows:
Income Statement
As of December 1, 20XX
Revenue from Services: $100,000
Cost of Goods Sold: $30,000
Gross Profit: $70,000
Total Operating Expenses: $15,000
Net Income: $55,000
Income Statement
As of December 1, 20XX
Revenue from Services: $100,000
Cost of Goods Sold: $30,000
Gross Profit: $70,000
Total Operating Expenses: $15,000
Net Income: $55,000
More Information
An income statement summarizes a company's revenues and expenses over a specific period. It's crucial for assessing profitability. The structure helps stakeholders understand how revenue transforms into net profit through various stages like COGS and operating expenses.
Tips
- Incorrect Order: Sometimes, users may not follow the correct sequence. Always remember to structure it following Revenues, COGS, Gross Profit, Operating Expenses, then Net Income.
- Miscalculating Totals: Ensure the calculations for Gross Profit and Net Income are verified correctly based on the provided data.
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