Income Statement/Statement of profit or loss

Question 1

What is the formula for COGS?

Answer 1

Beg inventory
+Purchases (& freight in)
=Cost of goods AFS
-Ending Inventory
=COGS

Question 2

When does accrual basis recognize revenues and expenses

Answer 2

Revenues are recognized when earned,
Expenses when incurred

Question 3

What is in a Multi Step Income Statement?

Answer 3

Net sales revenue
- COGS
= Gross Profit

-SGA expenses
-Depreciation expense
=Operating Income

+-Nonoperating items
=Income before tax

-Income tax
=income from continuing operations

+- Discontinued operations
=Net Income

Question 4

What are the key nonoperating items in a multistep income statement?

Answer 4

1. Interest income & expense
2. Dividend income
3. Gains and losses (unrealized & realized)