5/7/2019 Week 1

Question 1

What are Discontinued Operations reported for?

Answer 1

Discontinued operations are only reported for disposal of a component of the entire.

Question 2

Gains and loss from sale of fixed asset are reported using net or gross concept?

Answer 2

Gains and loss from sale of fixed asset are reported using net concept (e.g. proceeds - carrying value)

Question 3

What items are included in other comprehensive income (OCI)?

Answer 3

PUFE: Pension adjustment; Unrealized gain/loss; Foreign currency items; Effective portion of cash flow hedges

Question 4

Revenue and expense are reported using net or gross concept?

Answer 4

Revenue and expense are reported using gross concept

Question 5

Multi step income statement include?

Answer 5

Net sales (including goods, services, and rentals), less discount and return

• (cost of good sold)

= gross margin

• (selling expense)
• (G&A expense)
• (Depreciation expense)

= Income/loss from Operation

+ Other Revenue &

Gain (including interest revenue, Gain on sale of fixed asset & other revenue)

• Other Expense &

Loss (including interest expense, loss on sale of fixed asset)

= Income before unusual items and income tax

• Loss on sale of AFS securities

= Income before income tax

• Income tax expense

= Net Income (Income from Continuing Operation)

Question 6

What’s in Selling Expense

Answer 6

Selling Expense include: 1) Freight out 2) Salaries and commission 3) Advertising

Question 7

What’s in General and Administrative Expense

Answer 7

G&A Expense include: 1) Officer’s salary 2) legal and accounting fee 3) Insurance

Question 8

What is in Inventory cost?

Answer 8

Inventory Cost include: 1) Purchase price 2) Freight in

Question 9

What is in non operating expense?

Answer 9

non-operating expense: 1) interest expense 2) auxiliary activities

Question 10

When a fixed asset was sold, what does the gain/loss recognized?

Answer 10

When a fixed asset was sold, the gain/loss is recognized as part of income from continue operations. Gain/loss = proceed from sale - carrying value of the FA sold

Question 11

Under Percentage of Completion Method, how to recognize gross profit & loss?

Answer 11

Gross Profit:

1. compute percentage of completion: =actual cost during the period/ total estimated cost of contract
2. compute total gross profit (of completed contract): =total contract price - total estimated cost
3. Compute gross profit earned (PTD): = % of completion (1) * total gross profit (2)
4. Compute current year’s gross profit: Gross profit earned (3) - profit to date (PTD) at the bgn of the year Gross Loss: Recognize immediately in the year discovered (same for completed contract method

Question 12

In % of completion, when will current liability and current asset occur?

Answer 12

• Current liability occurs only when cululative progress billing > cumulative actual cost and cumulative estimated earnings(Gross profit earned to date) — like a deferrer revenue, you receive cash but still haven’t provide product/service
• Current asset occurs when cumulative progress billing < cumulative cost and cumulative estimated earnings — like an AR

Question 13

How much of the operating losses should be included in the loss from discontinued operation reported in Year 1 income statement?

Answer 13

the operation loss to be reported in year 1 income statement would be the total of year 1 operating loss, including losses occure before AND after the decision to dispose of the component was made, and NOT any year 2 operating loss.

—>projected operating losses are not anticipated and accrued.

Question 14

What’s included in the result of discontinued operations?

Answer 14

1. Result of operations of the component
2. Gain/loss of the disposal of the component
3. impairment loss = FV - Cost to sell, (and subsequent increase in FV)