F1-M1 Balance Sheet, Income Statement and Comprehensive Income Flashcards
How is selling a fixed asset used for operations reported on an income statement?
Net concept, showing the total gain (proceeds less carrying amount) as part of continuing operations, NOT net of income taxes.
What is included and not included in single-step income?
INCLUDED: All sales of goods, services and rentals.
NOT INCLUDED: Purchase Discounts (reduce COGS) and recovery of accounts written off (don’t hit the revenue account at all).
Comprehensive income includes:
All changes in equity during a period EXCEPT those resulting from owner investments and distributions to owners.
Should foreign currency transaction losses and gains be recognized? If so, when?
Yes. At the balance sheet date.
True or False? Freight out is a selling expense.
True
How are gains/losses from discontinued segments reported on an income statement?
Added to net income NET of taxes
When can an entity be reported in discontinued operations?
When the component meets the following “held for sale” criteria:
1. Management commits to a plan to sell the component.
2. The component is available for immediate sale in its present condition.
3. An active program to locate a buyer has been initiated.
4. The sale of the component is probable and the sale is expected to be completed within one year.
5. The sale of the component is being actively marketed.
6. It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn.
Quoting the exchange rate using the direct method involves:
Quoting the domestic price of ONE UNIT from another currency.
Quoting the exchange rate using the indirect method involves:
Quoting the foreign price of ONE UNIT of the domestic currency.
Are UNREALIZED losses on TRADING securities recognized?
Yes.
Other Comprehensive Income may include:
Pension Adjustments or Prior Service Costs
Unrealized Gains and Losses on Available-for-Sale Debt Securities and Hedges
Foreign Currency Items
Instrument Specific Credit Risk
What is an accurate statement of taxes pertaining to other comprehensive income items?
The individual components of OCI may be either reported on a before tax basis with an aggregate tax amount reported after these items or individually on a net of tax basis.
The company may choose to disclose the income tax expense or benefit in the footnotes or directly on the financial statements.
How is a transaction, denominated in a foreign currency recorded in terms of spot rate or forward rate and when?
A transaction denominated in a foreign currency is recorded at the SPOT RATE on the date of the transaction.
Note: The sale of an item in a foreign currency where the spot rate goes down from the date of sale to the measurement date results in a loss.
How may the individual components of OCI be reported, with respect ot taxes?
The company has the choice of reporting the components of OCI on either an individual net of tax basis or each component on a before tax basis with one amount shown after for the aggregate tax effects.
The company may choose to disclose the income tax expense or the benefit in the footnotes on the individual financial statements where these components occur.
The company can also report the aggregate tax impact as one amount after the individual OCI items are first present on a pretax basis or the individual components of OCI may be reported on a net of tax basis.
When accounts written off are recovered, which accounts are effected?
When accounts written off are recovered, the first entry is to debit accounts receivable and credit the allowance for doubtful accounts. Then, to record the collection of the cash, the debit is to cash and the credit is to accounts receivable.
