Help GHI Services complete their income statement by arranging the following items in the correct order and calculating the totals for each category.
Understand the Problem
The question asks us to assist GHI Services in arranging items for their income statement in the correct order and to calculate totals for each category to determine the net income.
Answer
1. Revenue from Services: $100,000 2. Total Cost of Goods Sold: $30,000 3. Gross Profit: $70,000 4. Total Operating Expenses: $15,000 5. Net Income: $55,000
Answer for screen readers
To complete the income statement, the items should be arranged as follows:
- Revenue from Services: $100,000
- Total Cost of Goods Sold: $30,000
- Gross Profit: $70,000
- Total Operating Expenses: $15,000
- Net Income: $55,000
Steps to Solve
- Identify the relevant components of the income statement
The income statement is typically structured with revenue at the top, followed by cost of goods sold (COGS), gross profit, operating expenses, and finally the net income. The given components are:
- Revenue from Services: $100,000
- Total Cost of Goods Sold: $30,000
- Gross Profit: $70,000
- Total Operating Expenses: $15,000
- Net Income: $55,000
- Organize the items in the correct order
The items should be arranged in the following order to complete the income statement:
- Revenue from Services: $100,000
- Total Cost of Goods Sold: $30,000
- Gross Profit: $70,000
- Total Operating Expenses: $15,000
- Net Income: $55,000
- Calculate the totals for each category
We can confirm each value through calculation to ensure accuracy:
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Gross Profit can be calculated as: $$ \text{Gross Profit} = \text{Revenue} - \text{Cost of Goods Sold} $$ Substituting in the values: $$ \text{Gross Profit} = 100,000 - 30,000 = 70,000 $$
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Net Income can be calculated as: $$ \text{Net Income} = \text{Gross Profit} - \text{Total Operating Expenses} $$ Substituting in the values: $$ \text{Net Income} = 70,000 - 15,000 = 55,000 $$
This confirms that the figures given are accurate.
To complete the income statement, the items should be arranged as follows:
- Revenue from Services: $100,000
- Total Cost of Goods Sold: $30,000
- Gross Profit: $70,000
- Total Operating Expenses: $15,000
- Net Income: $55,000
More Information
In the income statement, the gross profit shows how much money is made after accounting for the cost of goods sold before operating expenses are deducted. The net income represents the profit after all expenses. Understanding how to structure an income statement helps in analyzing a company's financial performance.
Tips
- Misplacing the order of the items in the income statement. Ensure that revenue is at the top followed by COGS, and that expenses are listed before net income.
- Failing to double-check calculations for gross profit and net income. Always recalculate to confirm figures.
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