FAR 1.2 INCOME STATEMENT

Question 1

COST OF GOODS SOLD

Answer 1

Cost of goods sold (COGS) = Beginning inventory + Cost of goods purchased + Direct manufacturing cost– Ending inventory

Question 2

SEPARATE DISCLOSURE

Answer 2

Only unusual and infrequent happenings require separate disclosure. REGULAR OCCURENCE doesn,t require separate disclosure

Question 3

In the single step income statement, the Total revenues

Answer 3

Net sales + Other revenues & gains.

Question 4

DISCONTINUED OPERATIONS AND IMPAIRMENT TESTING

Answer 4

allows indirect recognition of expected losses via impairment testing resulting in write-down to net realizable value [where Net realizable value (NRV) = Fair market value - Disposal costs]. If the NRV is lower than historical cost they would measure the equipment at NRV

Question 5

INVENTORY VALUATION

Answer 5

Historical cost, replacement cost and net realizable value are attributes used in inventory valuation or measurement at lower of cost or market

Present value of future cash flow is not used in measuring inventory.

Question 6

AVAILABLE FOR SALE SECURITIES OR INVESTMENTS decline in the fair market value (FMV) of an investment

Answer 6

The election of FV option for available-forsale securities or investments leads to unrealized gains or losses recorded in earnings rather than in OCI. The components of OCI are explained through the mnemonic PACER. Available-for-sale security is recorded at fair value at the balance sheet date. Any temporary decline in value is recorded in other comprehensive income for the period. However, if the decline was permanent in nature, the amount of the write-down should be recorded in the income statement as a loss.

Question 7

Expected gains or losses accounting for discontinued operations,

Answer 7

Expected gains or losses from operations in future periods are not considered while accounting for discontinued operations, until the period of occurrence. Only exception being indirect recognition of expected losses via impairment testing.