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Chapter
Chapter 4-1
Chapter 4-2
Chapter 4-3
Chapter 4-4
Cost of goods sold Depreciation expense Interest expense Rent expense Salary expense
Chapter 4-6
Chapter 4-7
Expenses
Net Income
Single-Step Format
Income Statement For the year ended Dec. 31, 2011 Revenues: Sales Rental revenue Total revenues Expenses: Cost of goods sold Selling expense Administrative exense Interest expense Income tax expense Total expenses Net income $ 63,570 17,150 8,860 1,860 7,580 99,020 14,710 $ 96,500 17,230 113,730
Chapter 4-9
$ 285,000 149,000 136,000 10,000 43,000 53,000 83,000 17,000 (21,000) (4,000) 79,000 23,700 $ 55,300 $ 0.75
Multiple-Step Format
Income Statement For the year ended Dec. 31, 2011 Sales Cost of goods sold Gross profit Operating Expenses: Selling expense Administrative exense Total operating expenses Income from operations Other revenue (expense): Rental revenue Interest expense Total other Income before tax Income tax expense Net income $ 17,230 (1,860) 15,370 22,110 7,580 14,530 17,150 8,860 26,010 6,740 $ 96,500 63,750 32,750
Chapter 4-11
Chapter 4-12
EPS to be reported for continuing operations, each of the non-continuing operations account, and net income.
Chapter 4-13
Chapter 4-14
Chapter 4-15
EPS Info
Chapter 4-16
Chapter 4-17
$ 285,000 149,000
Income tax expense Income from continuing operations Discontinued operations: Loss from operations, net of tax Loss on disposal, net of tax
Moved to
Chapter 4-20
Company must consider the environment in which it operates. Amount reported net of tax.
Chapter 4-21
Chapter 4-22
Net income
Chapter 4-23
Other revenue (expense): Interest revenue Interest expense Total other Income before taxes Income tax expense Income from continuing operations Extraordinary loss, net of tax Net income $
Chapter 4-24
$ 285,000 149,000
(21,000) (4,000) 79,000 23,700 55,300 315 189 504 54,796 539 $ 54,257
Chapter 4-26
$ 285,000 149,000
(21,000) (4,000) 79,000 23,700 55,300
Chapter 4-27
assets
Inventory obsolescence
Chapter 4-29
After 7 years
Chapter 4-31
Chapter 4-32
Illustration 4-10
Illustration 4-11
Income Statement Presentation of a Change in Accounting Principle (Based on 30% tax rate) Chapter 4-33
Corrections treated as prior period adjustments restate all prior financial statements presented
Chapter 4-34
Retained Earnings
Changes in Retained Earnings
Increase
Net income Change in accounting principle Error corrections
Decrease
Net loss Dividends Change in accounting principles Error corrections
Chapter 4-35
Chapter 4-36
Comprehensive Income
All changes in equity during a period except those resulting from investments by owners and distributions to owners.
Income Statement (in thousands) Sales Cost of goods sold Gross profit Operating expenses: Advertising expense Depreciation expense Total operating expense Income from operations Other revenue (expense): Interest revenue Interest expense Total other Income before taxes Income tax expense Net income
Chapter 4-37
$ 285,000 149,000 136,000 10,000 43,000 53,000 83,000 17,000 (21,000) (4,000) 79,000 24,000 55,000
Unrealized gains and losses on availablefor-sale securities. Translation gains and losses on foreign currency. Plus others Reported in Stockholders Equity
OCI presented as net of tax. OCI is also reported in the Stockholders Equity section in the balance sheet
Chapter 4-38
Chapter 4-39
Comprehensive Income
Balance Sheet Presentation
Regardless of the display format used, the accumulated other comprehensive income of $90,000 is reported in the stockholders equity section of the balance sheet.
Chapter 4-40
Under iGAAP, companies must classify expenses by either nature or function. If a company uses the functional expense method on the income statement, disclosure by nature is required in the notes to the financial statements. (SEC requires functional expense method)
Presentation of the income statement under U.S. GAAP follows either a single-step or multiple-step format. iGAAP does not mention a single-step or multiple-step approach. In addition, under U.S. GAAP, companies must report an item as extraordinary if it is unusual in nature and infrequent in occurrence. Extraordinary items are prohibited under iGAAP.
Chapter 4-41
Both iGAAP and U.S. GAAP have items that are recognized in equity as part of comprehensive income but do not affect net income. U.S. GAAP provides two possible formats for presenting this information. iGAAP provides the statement of recognized income and expense (SoRIE) format. Under iGAAP revaluation of land, buildings, and intangible assets is permitted (shown as an other comprehensive income adjustment).
Chapter 4-42