Income Statement/Statement of Profit and Loss

Question 1

increase in raw materials inventory represents the amount of inventory…

Answer 1

purchased but not used

Question 2

decrease in finished goods inventory represents the amount of inventory…

Answer 2

sold in excess of inventory manufactured

Question 3

what is comprehensive income?

Answer 3

net income + other comprehensive income (OCI)

Question 3

what is net income equal to?

Answer 3

operating income (rev-exp) + non-operating income less tax

Question 4

what is other comprehensive income (OCI)?

Answer 4

transactions that impact a company economically but have not been realized; includes those that can distort net income

Question 5

for foreign currency transactions what calculations do you do on the transaction date?

Answer 5

record transaction in functional currency using the transaction date spot rate

Question 6

for foreign currency transactions what calculations do you do on the balance sheet date?

Answer 6

-remeasure transaction using balance sheet spot rate
-recognize gain or loss income for difference
in rate from transaction date to balance sheet

Question 7

for foreign currency transactions what calculations do you do on the settlement date?

Answer 7

recognize gain or loss income for difference
in rate from balance sheet date to settlement date
-settle transaction in foreign currency

Question 8

gain or loss will result if the spot rate on the ________ date is different from the rate used on the ________ date

Answer 8

settlement

transaction

Question 9

what is a forward contract?

Answer 9

when two parties agree to exchange an underlying asset in the future at a fixed price

this is when day rates come into play

Question 10

what is foreign currency translation?

Answer 10

when the functional currency of a foreign subsidiary differs from the parent’s reporting currency, F/S accounts
are translated during consolidation

Question 11

how are foreign currency translation gains and losses recognized?

Answer 11

as a separate component of SE (OCI)

Question 12

how are remeasurement gains and losses recognized?

Answer 12

in income

Question 13

what is discontinued operation?

Answer 13

when an entity plans to sell/dispose of a component of business and the held for sale criteria are met OR when a component is sold/disposed of during the period

Question 13

what is the criteria for a component to be “held for sale”?

Answer 13

-component is in a condition to sell
-component is available to sell
-action to complete the disposal plan have been
initiated and a buyer is actively sought
-sale is probable and expected to be complete within one year
-component is marketed at a reasonable price

Question 14

TRUE OR FALSE

expected losses from discontinued operations are not included in the F/S until they occur

Answer 14

TRUE

Question 15

TRUE OR FALSE

expected disposal loss may be indirectly recognized through impairment testing and writing down a component to fair value

Answer 15

TRUE

Question 16

how are components measured?

Answer 16

the lower of carrying value or fair value less disposal costs

Question 17

when is revenue recognized?

Answer 17

when the services are provided

Question 18

under expense recognition…

Answer 18

assets used to earn revenue are expensed (like COGS, depreciation)

Question 19

what is inventory’s intended use?

Answer 19

to be sold to customer, so when its sold, its recorded as COGS

Question 20

during the life span of physical long term assets, a portion of revenue that is earned throughout the use they gave that year is….

Answer 20

depreciated as depreciation expense which is a selling expense (apart of selling, general and admin expenses)