Question

Most of people know Hewlett Packard company as a leading of personal computers, printers, and scanners, and storage and networking products for large and small customers alike. However, HP also is major provider of technology consulting, outsourcing, and services to business, educational, and government organizations. Finally, HP also provides financing for products and services to its large customers. As a consequences, its income statement show three sources of operating revenues (good/services/financing) and three related cost of good/services/financing provided to customers. Presented below are items adapted from its recent income statement for the year ended October 31. Net earning per share was $3.78 and the weighted-average shares used in the computation was 2,319.

1. Recognizing that HP has three sources of operating revenues, prepare a classified (multi-step) income statement  for HP following that format and using the subtotals presented in Exhibit.5.5. (Hint: the term "charge" is a synonym for "expense".) 
   

2. Which source of operating revenues produces the highest gross profit.
   

Answer 1

Income statement:

It is the financial statement which shows the earning of income or loss through its operations.

1.

Prepare the income statement as follows: -

Explanation:

Gross profit is calculated by deducting the cost of sales. Net profit has been calculated by deducting all operating expenses. Profit available to shareholders has been calculated by tax expenses and other non-operating expenses incurred during the period.

2.

Gross profit from the sale of the product is $19,735 which is the highest among all operations.