The Mathematics of Money

488 Chapter 12 Financial Statements

their amounts are often put in a separate column to clearly separate the totals for each item

from the total for the categories. Sammy might provide a bit more detail in his statement so

that it looks like this:

Sammy’s Lemonade Stand

Second Quarter 2007 Income Statement

Sales $185.25

Cost of goods sold

Lemons $34.60

Sugar $12.25

Cups $20.15

Other $8.35

To tal cost of goods sold $75.35

Gross profi t $109.90

Expenses

Advertising $12.00

Wages $31.00

Other $2.00

To tal expenses $45.00

Net income $64.90

While this income statement is lengthier and contains more detail than the first one, it is

based on the same principles as the first. The amounts for each of the major categories

(sales, cost of goods sold, and expenses) are the totals of their subcategories.

The expenses, for example, are equal to the sum of advertising, wages, and other expenses.

Example 12.1.2 Fill in the missing spaces in the income statement below:

Latchman’s Pharmacy

Third Quarter 2008 Income Statement

Sales $248,535

Cost of goods sold

Prescription medications $94,350

OTC medicines $11,563

Health and beauty $23,505

Other/sundries $26,505

To tal cost of goods sold (a)

Gross profi t (b)

Expenses

Wages $53,650

Rent $22,985

Other $18,754

To tal expenses (c)

Net income (d)

The total cost of goods sold can be found by adding the amounts in each of the four

subcategories.

Cost of goods sold  $94,350  $11,563  $23,505  $26,505  $155,923

The gross profi t can be found as:

Gross profi t  $248,535 
 $155,923  $92,612

The expenses total:

Total expenses  $53,650  $22,985  $18,754  $95,389

The net income is then:

Net income  $92,612 
 $95,389  
$2,777