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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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