A describe the components of the income statement and alternative presentation formats of that statement;

Question 1

Components of the income statements and alternative formats

Answer 1

Inc Stmt = Rev(sales ~ cogs) - Exp + (G-L)

Expenses = costs of selling, inventory costs

Gains - non-op or op
Losses - non op or op

Alt format: Comprehensive - includes GP (rev - COGS)
Multi-step: GP is sep

Question 2

Revenue recognition

Answer 2

Rev are recognized when earned

Question 3

Net Revenues (adjustments)

Answer 3

(returns, allowances)

Question 4

Expense classes

Answer 4

COGS (..)

Operating

Interest

Taxes

Question 5

Expenses by nature, function

Answer 5

nature - Depr. exp from manufacturing and admin

Func: COGS - all costs associated with manufacturing

Question 6

Identify Gains and losses (of economic benefits)

Answer 6

Difference between sales price and book value(..)

Question 7

Summarizing NI

Answer 7

NI = Income (revenues + gains) - (expenses+losses)

Question 8

Presentation formats: Single step, multi step

Answer 8

Single: Rev and Exp grouped together
Multi: includes gross profit (R - COGS) revenue that remains after deducting COGS

Question 9

Calc Operating profit or income

Answer 9

Gross profit - operating expenses

Question 10

Examples of operating expenses

Answer 10

SGnA

Question 11

Calc Net income, earnings, bottom line

Answer 11

Operating profit - interest expense + income taxes

Question 12

Noncontrolling, minority, minority owners interest

Answer 12

Non controlling. - Pro rate share of sub’s inc not owned by parent

If owned by parent, subtracted in arriving to NI (parent reports all sub’s rev’s n exp’s)

Question 13

What accounting method is IS based on?

Answer 13

Income Statements are based on the accrual accounting method - recognize revenues when earned and liabilities when incurred.