F1.2 Income Statement and Balance Sheet Flashcards
GAAP, material transaction that is infrequent in occurrence but not unusual should be presented separately as a component of income from continuing operations when transaction results in
Gain or Loss, a material transaction that is “infrequent in occurrence” and/or “unusual in nature” should be presented separately as a component of “income from continuing operations” when the transaction results in a gain or loss.
Charitable contributions
Include amounts the company gave to recognized charities. Not portion employees gave and redesigning packaging is not a contribution to a charity.
Single Step total revenues
Sales, single step income statement will include in total revenues all sales of goods, services, and rentals. Purchase discounts not included in revenue, but instead reduce cost of goods sold. The recovery of accounts written off does not hit the revenue account.
Net Income (q5)
Gain from discounted segment (after tax). Adjustment for the prior year understatement of amortization expense is a prior period adjustment that will be reflected in the beginning retained earnings, not on the income statement. The unrealized gain on the available for sale debt security will be reported in other comprehensive income
q14, Income from continuing operations (credits - debits) less income taxes = NI
Frequent hail damage as common occurrence
Include loss in continuing operations, with no separate disclosures
Selliing expense
q7 Advertising, freight out, office space, and sales salaries and commissions. / Freight out is a selling expense. 1/2 of the office per question. Freight in is part of “cost of goods sold”
General and Administrative Expenses
Legal and audit fees, and rent for admin. Office (1/2 per question). Loss on abandoned data processing equipment is not an operating expense and should not be included in G&A exp. / q12 accounting and legal fees+office salaries+insurance / q24, interest exp. is a separate line item on IS and advertising is a selling exp.
Total revenues (single step IS)
Net sales rev. (goods & services) + interest rev. (and dividends earned) + Gain on sale of equip. / Various amounts of discounted operations should be included in discountinued operations, not in revenues
Sale of fixed asset used in operations
Transaction resulted in a gain, reported using net concept (proceeds less carrying amount). Gain resulted in recognition of an asset not in the ordinary course of business, but it did not qualify as part of discontinued operations. / Sale of warehouse reported in continuing operations. When a fixed asset is sold, gain or loss is recongized as part of income from continuing operations. The amount of gain or loss is equal to difference between proceeds from sale and carrying amount of fixed assets sold.
Installed cabinets to display merchandise for five year use, multi-step IS
Should include 1/5 (depr. Exp.) of cabinet costs in selling, general, and administrative exp.
Income for continuing operations
Net sales - cogs - selling exp. - admin. Exp. - int. exp. + gain on debt extinguishment (here, gain considered usual and recurring)
Disposal of component of business
Reported in discontinued operations.
Gain on insurance settlement of casualty
Replacement cost - deductible = Insurance proceeds less cost to dismantle less current carrying amount = Gain on insurance settlement of casualty
Gross profit
Net sales - Cost of Sales
Prepaid insurance reported as current asset
Minimum operating cycle for purposes of reporting a “prepaid” current asset is one year (or 12 months) / q22, checks are not considered disbursement until mailed because they are still under control of the company
