Balance Sheet, Income Statement and Comprehensive Income Flashcards
How do Prepaid Expenses affect Cash Basis to Accrual Basis Balances?
Beginning Prepaid Expenses were paid last year, incurred this year, subtract from Net Income.
Ending Prepaid Expenses were incurred last year, paid this year, add to Net Income.
What is the accounting treatment of a cash dividend?
When you account for a cash dividend, you debit retained earnings and credit dividends payable. Note: Dividends are not paid on treasury stock.
What happens during a foreign transaction, when the foreign currency depreciates vs. the US Dollar?
The foreign currency depreciating would cause a loss for the US company on their income statement.
When do you capitalize interest on a construction loan?
Interest expense is capitalized during the construction period up to the time with construction is substantially complete.
Describe what accounts make up net income on a Multiple Step Income Statement.
On a Multiple Step Income Statement, net income includes income from continuing operations (operating, non operating and income tax expense accounts) and discontinued operations, but excludes Other Comprehensive Income items.
What is included in Comprehensive Income and Other Comprehensive Income?
Comprehensive income is the sum of net income PLUS Other Comprehensive income. OCI includes changes in a funded pension plan, unrealized gains and losses on available for sale securities and derivative instruments designated as cash flow hedges, foreign currency items, and instrument specific risk.
Where are foreign exchange and losses reported on the income statement?
Foreign exchange gains and losses are included in net income before discontinued operations. They are considered income from continuing operations and get reported BEFORE discontinued operations.
What is the operating cycle for pre paid expenses?
The minimum operating cycle for purposes of reporting a prepaid current asset is one year (or 12 months).
