Flowers by Freddie presented the income statement below for its most recent fiscal year. The items have been numbered for convenience in analysis.
(1) Sales revenue ......... $371,923
(2) Cost of goods sold ...... 201,668
(3) Gross profit ......... 170,255
(4) Operating expenses ...... 72,853
(5) Operating income ........ 97,402
(6) Other revenues ........ 538
(7) Other expenses ........ (13,227)
(8) Pretax income ......... 84,713
(9) Income taxes ......... 29,650
(10) Net income .......... $ 55,063
Answer the following questions. Be specific. Give examples to clarify.
a. What is the difference between the revenue listed in item 1 and that listed in item 6?
b. What does item 3 represent, and why is it important?
c. What do items 2, 4, and 7 have in common?
d. How are items 2, 4, and 7 different from one another?
e. How is item 9 similar to items 2, 4, and 7?
f. Why do you think items 2, 4, 7, and 9 are listed separately on an income statement-rather than being lumped together as one item?