9/25/2010 $ 65,225 39.541 25,684 1,782 5,517 be Apple Computer (AAPL) INCOME STATEMENT ($ in millions) Fiscal year ended (FYE) Sales revenue Cost of goods sold (COGS) Gross profit Research and development expense (R&D) $ Selling, general, administrative expense (SGA) Depreciation and amortization expense Other operating expenses Total operating expenses Operating Income Interest income (expense) Investment income (expense) Gains (losses) on the sale of assets Other revenues (expenses) Total nonoperating revenues and expenses Income before income tax Provision for income tax Income from continuing operations Nonrecurring items 7.299 18,385 0 OOO 0 0 _155 +_155 18,540 4.527 14,013 0 $ 14,013 Net income computed Identify subtotals and totals on the multi-step income statement and how Purpose: Understand the information presented by each multi-step subtotal and to cost of sales (the cost of purchasing or manufacturing the actual products sold). It is the first indica Gross profit is the difference between sales revenue inflows from a company's primary operation profitability Operating income is gross profit less all operating expenses. It indicates how well a firm is managed Income before income tax indicates profitability from both operating and nonoperating activities Income from continuing operations indicates profitability from operating and nonoperating activities including the impact of income tax. Net Income is all revenues and gains less all expenses and losses from operating, nonoperating and nonrecurring items. It is also referred to as earnings, the bottom line, or profit (loss). When amounts are requested, refer to the income statement of Apple Computer for the fiscal year endes on 9/25/2010 on the previous page. Q1 Sales Revenue minus (operating expensesonoperating revenues and expenses / COGS) equals Gross Profit that totals $ million Q2 Gross profit minus (provision for income tax / operating expenses (other than COGS) / nonoperating revenues and expenses) equal Operating Income that totals $ million. Q3 Q4 05 Operating income plus or minus (provision for income tax / operating expenses / nonoperating revenues and expenses) equal Income before Income Tax that totals 5. million Income before income tax minus (provision for income tax / nonoperating revenues and expenses / COGS) equals Income from Continuing Operations that totals $ million Income from continuing operations plus or minus (provision for income tax / nonrecurring items / nonoperating revenues and expenses) equal Net Income that totals $ million. Net Income can either be distributed to stockholders as (dividends / gross profit/ retained earnings) or be retained in the business as (dividends / gross profit/ retained earnings). On the multi-step income statement, (3/4/5/6) different subtotals and totals provide helpful information for decision makers. Q6 Q7 Q8 When comparing companies within the same industry, it is best to compare (Operating Income / Income from Continuing Operations / Net Income). Why? 09 In this accounting period BLOOMIN" FLOWERS, a florist shop, purchased flowers from a wholesaler costing $24,000 and sold them to customers for $32,000. Wages and other operating expenses total $3,000. Back in the year 2003, the company purchased land for $2,000 (that was never utilized) and sold it during this accounting period for $6,000. Using these events, prepare the income statement for Bloomin' Flowers below. Bloomin' Flowers INCOME STATEMENT Sales revenue Cost of sales Gross profit $ Operating expenses $ Operating income $ Nonoperating revenues and expenses Income before income tax Q10 What is the difference between revenue, a gain, and net income? 011 The FASB and the IASB are working to establish a common format, organizing information operating, investing, and financing activities for the balance sheet / income stateme statement of cash flows)