FAR-F1-M2-Income Statement and Balance Sheet

Question 1

Are “Freight out, salaries for sales people, commissions and advertisements” considered selling expenses or general and administrative expenses?

Answer 1

Freight out, salaries for sales people, commissions and advertisements are considered selling expenses and are presented separately from general and administrative expenses

Question 2

Are “officers salaries and insurance expenses” considered selling expenses or general and administrative expenses?

Answer 2

Officers salaries and insurance expenses are considered general and administrative expenses and are presented separately from selling expenses.

Question 3

What are the main line items in a multi-step income statement?

Answer 3

Net Sales
(COGS)
=Gross Margin
(SGA)
(Depreciation)
=Income (loss) from operations aka Operating Income
Interest Revenue
Other gains or revenue
(Interest Expense)
(Other losses or expenses)
=Income before income tax
(Income tax)
=Income from Continuing Operations
Discontinued Operations (net of tax)
=Net Income

Question 4

Where should items of income or loss that are unusual or infrequent (or both) be stated on a multi-step income statement?

Answer 4

Items of income or loss that are unusual or infrequent (or both) should be reported separately as part of income from continuing operations. The nature of the item and the F/S effects should be disclosed on the face of the income statement or in the footnotes.

Question 5

What are the main line items of a single step income statement?

Answer 5

Revenue and Other items:
=Total Revenue and Other Items
Expenses and Other items:
=Total Expenses and Other Items
Income (loss) from Continuing Operations
Discontinued Operations (net of tax)
=Net Income