Chapter 4 Flashcards
P4-12
- gain from sale
- unrealized gain/losses on OCI inv
- loss on expropriation
- OCI - taxes
Gains are going on a IS, not a BS!
Loss on expropriation is going on an IS, not a BS! Unrealized gain or losses on OCI are separate on the IS and they go in the AOCI acc. and they are net of tax
OCI - are calculated net of tax!
If the taxes are given in the problem (not as a percentage) ; when you make the new IS, don’t forget that you might have to recalculate the taxes (by finding out what percentage was before)
recording allowance for DA (doubtful accounts)
Dr. Bad Debt Expense
Cr. Allowance for DA
Allowance for DA = contra account on BS to Acc. Rec = net realizable receivable
The single-step income statement emphasizes
total revenues and total expenses.
Which of the following items is not shown in the retained earnings statement?
appropriations
expenses
expenses
The modified cash basis
capitalizes and depreciates property, plant and equipment.
Excess of gross profit over operating expense
= income from operations
- Net Sales - COGS
- Gross profit - operating expenses
Non operating section (special gains/losses; unusual gain/losses; secondary activities)
- Other revenues and Gains - other expenses and losses - income tax
- Discontinued ops (net of tax)
a. loss/gain from ops
b. loss/gain o disposal
- Gross profit
- Income from operations
- Income from cont ops
- Net income
Unusual gains or losses
- material
- not material
- disclosed separately in non-operating section under other gains and losses
- included in income from cont ops.
- they are combined with other item in the IS
Examples of unusual gains or losses
- a strike is NOT an unusual event in a business settings
- a flood can be considered unusual if the company is not in an area where floods are regular
- hurricane in Caribbean is NOT
Items reported net of tax (4)
- discontinued ops
- OCI
- changes in accounting policy (inventory system change)
- prior period adjustments
Ending inventory effect
- one year
- two years (no correction)
- undertsated - net income undertated; overstated - net income overstated
- because the ending balance is the beginning balance of the next year, the mistake on net income/retained earnings cancels out
Beginning inventory effect on NI/RE
Beg Inv understated - NI overstated
Beg Inv overstated - NI understated
Mistated Inventory effects on NI
- beginning
- ending
- opposite effect (same effect for COGS)
- same effect (opposite for COGS)
Mistated expenses effects on NI
- understated
- overstated
the opposite of the expenses: (like the beginning inventory)
- overstated
- understated
EPS - under IFRS
basic and diluted EPS must be shown on the face of the IS
