XYZ Corporation provided the following details for the financial year:

• Beginning Inventory: $40,000
• Purchases: $120,000
• Ending Inventory: $30,000
• Sales Revenue: $200,000
• Sales Returns: $10,000
• Sales Discounts: $4,000
• Operating Expenses: $50,000

Requirements:

1. Calculate the cost of goods sold.
2. Determine the gross profit.
3. Prepare the income statement.
4. Compute the operating profit.
5. Explain the importance of sales discounts in revenue management.