🎥+✏️Exercise: Income Statement🟢

Responses

1. 

   PATIENCE OFORI 17 February 2026

   I will be grateful for notes to this explanation ( Exercise : income statement) I don’t see the notes to download

   1. 

      Maroun, CPA 21 February 2026

      Hello Patience,

      There are no downloadable notes available for this specific income statement exercise.

2. 

   Hien Tran 3 March 2026

   Why Gross Margin is the same as gross Profit on this exercise? Isn’t Gross Margin is the percentage? Gross Margin = (net sale – cogs)/net sale?

   1. 

      Maroun, CPA 5 March 2026

      Hello Hien,

      You are absolutely right that the word “gross margin” usually refers to the gross profit percentage (Gross profit ÷ Sales). However, in everyday accounting terminology and on the face of an income statement, the terms Gross Margin and Gross Profit are frequently used interchangeably to represent the exact same absolute dollar amount (Net Sales − Cost of Goods Sold).

      Because the income statement in the video uses “Gross Margin” as a dollar line item (such as the $10,800 for Year 1), Professor Farhat handwrote the word “Profit” next to it to clarify that we are looking for the raw dollar figure, not the percentage ratio.

      Great attention to detail, and keep up the excellent work!

3. 

   Jessica Walters 24 June 2026

   How did we get ending inventory of $16,400? When plugging that number in the formula of Beginning Inventory + Purchase- Ending Inventory=COGS. When I used that formula I got $80,800 (14200+50200-16400). Thanks!

   1. 

      Maroun, CPA 26 June 2026

      Hi Jessica,

      You actually have the exact right formula, but it looks like you accidentally hit the “plus” sign on your calculator at the very end instead of the “minus” sign.

      Let’s look at your numbers:
      Beginning Inventory ($14,200) + Purchases ($50,200) = $64,400 (This is your Cost of Goods Available for Sale).

      If you take that $64,400 and subtract $16,400, you get $48,000, which perfectly matches the Cost of Goods Sold for Year 2!

      To answer your first question about how we found the $16,400 to begin with, we just rearranged that exact same formula to solve for the missing Ending Inventory:

      Beginning Inventory + Purchases – COGS = Ending Inventory
      $14,200 + $50,200 – $48,000 = $16,400

      Once we calculated that Year 2’s Ending Inventory was $16,400, we simply carried it over to be Year 3’s Beginning Inventory.

      Hope this clears it up!