Income Statement Flashcards
(12 cards)
How is Cost of Goods Sold Calculated?
Beginning Inventory
+Net Purchases (includes Freight-In)
___________________________
=Goods Available for Sale
-Ending Inventory
___________________________
=Cost of Goods Sold
What are Purchase Discounts ?
Purchase Discounts are discounts that a client receives when making a purchase. This means that this account would be netted against their purcahse. Is a purse cost $100 and the discount is $10, the total purchase would be $90 and that $90 would be considered a company’s revenue.
What are accounts that are “Written Off?”
Written off accounts is debt owed to them from a customer that the company thinks they will never receive. It is netted against the Accounts Receviable Account and recorded as a loss in the income statement.
Solve for a Multiple Step Income Statement? Just the Formula
Sales Revenue: $600,000
Less: Cost of Goods Sold: $300,000
__________________________
= Gross Profit: $300,000
Less: Operating Expenses: $220,000
[○Salaries Expense (Administrative): $80,000
○ Salaries Expense (Sales): $50,000
○ Rent Expense: $40,000
○ Utilities Expense: $20,000
○ Advertising Expense: $30,000
○ = Total Operating Expenses: $220,000]
___________________________
= Operating Income: $80,000 (GP $300,000-OP EXP $220,000)
Non-Operating Revenues:
○ Interest Income: $10,000
○ Gain on Sale of Investments: $25,000
Less: Non-Operating Expenses:
○ Interest Expense: $15,000
___________________________
= Net Non-Operating Income: $20,000
=Net Income Before Taxes: $100,000 (Op. Income $80,000 + Net Non-Op. Income $20,000)
Less: Loss from Discontinued Operations: $18,000
____________________________
= Net Income: $82,000
When attempting to calculate the Gain/Loss of Sold Assets in a Discontinued Operation, how are the Sold ASSETS treated?
When trying to calculate the Gain/Loss on a Discontinued Operations, ASSETS sold should be SUBTRACTED from the Consideration Received b/c ASSETS are technically a benefit that is now lost or “missed out on” b/c of the Sale taking place.
What is the earliest point at which a Segment of a Business can be reported as a Discontinued Operation?
The earliest point at which a Business Segement can be reported as a Discontinued Operation is when the Entity plans to sell or dispose of it and when the “Held for Sale” citeria is met.
What is OCI? What statement is it listed?
OCI includes transactions that can impact a company economically but have not been realized and distorts Net Income. OCI items are NOT included in the calculation of Net Income but are instead transferred directly into AOCI under Shareholder’s Equity.
What’s the formula for COGM?
Cost of Goods Manufactured Formula:
COGS
+ Ending Inventory
-Beginning Inventory
______________________
= COGM
On a Multiple Step Income Statement, what 3 types of expenses are included in The “General and Administrative Expenses” section?
- Officer’s Salaries
- Accounting and Legal Costs
- Insurance for the high-level administration
When is REVENUE recognized under Accrual Basis of Accounting? Expenses?
REVENUE is recognized when EARNED.
Expenses are Recognized when INCURRED.
Foreign Currency Transactions are reported where?
Foreign Currency Transactions are reported on the Income statement as part of “NON-Operating Gains or Losses.”
This is not the same as “Foreign Currency Translation Adjustments which are reported as part of OCI on the Equity Statement.
When calculating the Gain or Loss on the Disposal of the Assets, what do you do with “Expected Losses?”
“Expected Losses” are also recognized immediately, just like a regular loss.
