Word has gotten around that you know accounting and can explain it well. Jim, another of your friends has a unique business. During the summer he buys hats that cost $5.00 each and sells them at the beach for $12.00 each. Other than the cost of the hat, his only other expense last summer was $120 for parking. He sold 78 hats last summer. His accountant prepared a financial statement for him and he has several questions about the income statement. He asks: What does the cost of goods sold and gross profit mean? How much gross profit do I make on each hat? Why show both gross profit and net income?
Word has gotten around that you know accounting and can explain it well. Jim, another of your friends has a unique business. During the summer he buys hats that cost $5.00 each and sells them at the beach for $12.00 each. Other than the cost of the hat, his only other expense last summer was $120 for parking. He sold 78 hats last summer. His accountant prepared a financial statement for him and he has several questions about the income statement. He asks: What does the cost of goods sold and gross profit mean? How much gross profit do I make on each hat? Why show both gross profit and net income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Word has gotten around that you know accounting and can explain it well. Jim, another of your friends has a unique business. During the summer he buys hats that cost $5.00 each and sells them at the beach for $12.00 each. Other than the cost of the hat, his only other expense last summer was $120 for parking. He sold 78 hats last summer. His accountant prepared a financial statement for him and he has several questions about the income statement. He asks:
- What does the cost of goods sold and gross profit mean?
- How much gross profit do I make on each hat?
- Why show both gross profit and net income?
- Using Jim's figures, calculate his cost of goods sold, gross profit and net income - SHOW YOUR CALCULATIONS
If I have hats returned or a give a discount, how will that be shown on the income statement?
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