Prepare the 2024 income statement for Wal-Mart given Sales $300,000, Sales Returns and Allowances $8,000, Sales Discounts $2,000, Cost of Goods Sold $190,000, Selling Expenses $25,000, and General and Administrative Expenses $35,000.

What you are building in this problem

You are preparing a multi-step income statement: start with sales, subtract contra-sales items to get net sales, subtract cost of goods sold (COGS) to get gross profit, then subtract operating expenses to get net income.

Step 1: Compute net sales

Contra-sales accounts reduce sales.

$$\text{Net Sales} = \text{Sales} - \text{Sales Returns and Allowances} - \text{Sales Discounts}$$

$$\text{Net Sales} = 300{,}000 - 8{,}000 - 2{,}000 = 290{,}000$$

Step 2: Find gross profit

Gross profit measures profit after merchandise costs.

$$\text{Gross Profit} = \text{Net Sales} - \text{COGS}$$

$$\text{Gross Profit} = 290{,}000 - 190{,}000 = 100{,}000$$

Step 3: Subtract operating expenses to get net income

Operating expenses here are selling expenses and general and administrative expenses.

$$\text{Total Operating Expenses} = 25{,}000 + 35{,}000 = 60{,}000$$

$$\text{Net Income} = 100{,}000 - 60{,}000 = 40{,}000$$

Income Statement (Wal-Mart, 2024)

Wal-Mart Income Statement For the Year Ended 2024

• Sales Revenue: $300,000

• Less: Sales Returns and Allowances: $(8,000)$

• Less: Sales Discounts: $(2,000)$

• Net Sales: $290,000

• Cost of Goods Sold: $(190,000)$

• Gross Profit: $100,000

• Selling Expenses: $(25,000)$

• General and Administrative Expenses: $(35,000)$

• Total Operating Expenses: $(60,000)$

• Net Income: $40,000

Note about the inventory numbers given

Beginning inventory ($20,000) and ending inventory ($24,000) are normally used to compute COGS using

$$\text{COGS} = \text{Beg. Inv.} + \text{Net Purchases} - \text{End. Inv.}$$

But since COGS is already provided as $190,000 and purchases are not given, the inventory figures are not needed to complete this income statement.