FINANCIAL STATEMENTS Flashcards
1
Q
What are the four critria that needs to be determined for it to be a long term liability?
A
1 - agreement doesn’t expire within the longer of 1 year or operating cycle
2 - noncancelable by the lender
3 - no violation agreement exist at the balance sheet date
4 - lender is financially capable of honoring agreement
2
Q
What are the items that are included in Current Asset?
A
-Cash and Cash equivalent
-Certain individuals trading
-available for sale
-held to maturity debt securities
- Accounts receivable
- Inventory
- prepaid expense
- individual investments in equity securities
Remember for current asset items these that can be converted into cash within one year time frame
3
Q
Are gain & losses reported together or separate on the component of income from continuing operations?
A
separately
4
Q
Calc the Income statement in the single step income statement?
A
Total revenue 213,900
Discontinued Oper 12,000
Reported revenue 201,900
When Discontinued operation is in the income statement it would be deducted after the revenue has been calculated
5
Q
How should gain or loss be reported that are unusual in nature, infrequent in occurrence?
A
recorded separately in the continuing operations and discontinued operations
6
Q
What Other Comprehensive income include?
A
Under the existing accounting standard
1 - unrealized gains or losses on investments in debt securities classified as available for sale securities
2 - gains and losses on derivatives designated and qualifying as cash flow hedges
3- certain foreign currency items
Foreign currency items included in OCI
1 - a gain or loss on a hedging derivative in certain cash flow hedges
2 - the gain or loss on a hedging derivatives or nonderivatives in a hedge of a net investment in a foreign operations treated as a translations adjustments
7
Q
How to calc operating expenses under the accrual basis of accounting?
A
In order to calc the operating expenses we need to first know the operating expense once we know the operating expense we next need to find the beginning (prepaid expense of the year and ending of the year and see the difference. Once that is figured out next we need to calc the accrued liabilities beginning of the year and ending of the year. Finally we will use the difference between operating expenses and accrued liabilities and get a difference of accrual basis operating expenses
Ex - Operating expense - 150,000
Prepaid expenses - (5,000)
Accrued expenses - 20,000
Accrual basis operating expenses 165,000
8
Q
Under the cash basis of accounting how is income/ loss operates?
A
Remember during the cash basis of accounting revenue and expenses are recognzed when cash is paid or received.
Even when goods or services are completed, delievers, received
Ex - Sales of Cash 1,200,000
Expense paid 1,300,000
Loss of 100,000
9
Q
Under the accrual basis method of accounting calc pretax income?
A
Remember during accrual when Current Asset goes up then cash goes down and vice versa
AR goes up 16,000
Cash goes down
AP goes down 6,000
Cash goes down to does the same
Lower by 16,000
10
Q
How to calc Retained earnings for Dec 31, 2023?
A
Step 1 - we need to Subtract the Revenues - Expenses because we need Net Income
Revenue - 3,600,000 - Expenses - 2,600,000 = 1,000,000 Net Income
Step 2 - We need to calc the income tax expense so we use Net Income of 1,000,000 x 30% = 300,000 Income tax expense
Step 3 - Add Beginning Retained Earnings 630,000
Step 4 - We calc all the missing pieces we need to calc Retaining Earnings
We included the following
Net Income 1,000,000 Income Tax Expense (300,000) Retained Earnings 630,000
Retained Earnings of 1,330,000
11
Q
Item that are included for Current Liabilities?
A
AP - 19,000
Bonds Payable 34,000
Discount on bonds payable(2,000)
dividends payable 5,000
income tax payable. 9,000
Current liabilities 65,000
*Remember current liabilities are item or things you may owe the landlord, vendors, employees, accruals and payables
12
Q
What can a Balance sheet be useful in providing?
A
- Computing rates of return
- Evaluating capital structure
- Assessing liquidity and financial flexibility
13
Q
What are some account that are in the equity account?
A
Revenues
Expense
Dividends
Common Stock
14
Q
All Assets and Expenses and dividends accounts usually does what on the T account?
A
Debit side it always increases
Remember professor farhat
DEA (DEBIT) Increases
15
Q
liabilities, stockholder equity accounts, revenue
A
credit side
16
Q
How to calculate Cost of Goods sold?
A
In this problem since we have the COGM - 520,000 which can used to calc COGS
COGM - 520,000
BEGIN IN - 120,000
ENDING IN - (110,000)
COGS - 530,000
17
Q
How to calc the revenue section of the Income Statement?
A
Total Revenue which was 213,900
Gain on disposal 18,000
Income tax (6,000)
after tax results from discontinued operations 201,900
18
Q
How to calc the Cost of Manufactured?
A
Cost of sales - 60,000
Begin Inventory 100,000
Ending Inventory 90,000
60,000 - 100,000 + 90,000
COGM - 50,000
19
Q
What is included in the general and adminstrative expense?
A
accounting, legal, other fees professional services offices salaries
insurance
wages of office staff miscellaneous supplies
20
Q
Which financial statement provides a summary of a firms operations for a period of time?
A
Income Statement
21
Q
transaction that is unusual in nature infrequent in occurrence report?
A
continued of income from continuing operations
22
Q
A gain or loss from a transaction that is unusual in nature or infrequent in occurrence should be reported separately of income?
A
before results of discontinued operations
23
Q
How to calc gross profit?
A
Net Sales - 500,000
COGS - 100,000
Gross Profit - 400,000
24
Q
How to calc Comprehensive income?
A
Comprehensive income calc you need to remember that comprehensive income includes net income and other comprehensive income.
Net Income - Sales revenue 800,000
COGS 600,000
Operating Exp (90,000)
Net Income 110,000
Unrealized holding G&L 30,000
25
What changes do you need to have for comprehensive income ?
all changes are included in equity
Net Income includes changes from continued operations and discontinued operations
26
How to calc Net Income?
To calc Net Income we need to know Revenue - Expenses
Revenues 80,000
Operating Expense 50,000
Income tax expense (10,000)
Net Income - 20,000
27
How to calc Comprehensive income?
Comprehesive Income
Net Income 86,500
Unrealized loss on AFS 8,100
Unrealized gain foreign currency translation 3,400
3,290
83,210
Remember when calculting Comprehesive income
you need Net Income subtracted by unrealized loss AFS
& Unrealized gain foreign currency transaction
OCI items
28
How to calc Other Comprehensive Income?
Other comprehensive income includes all items of comprehensive income not including Net Income
Unrealized holding loss on AFS is 17,000
29
How to calc the reported total revenues? using the single step income statement method
In the single step income statement method are included in income from continuing operations as either revenues or expenses.
Total revenue - 213,000
12,000
after tax results from discontinued operations
total revenue 201,900
30
How to calc Retained Earnings when there is tax rate ?
Step 1 - we need to subtract the Revenues - Expenses which is given the problem. The reason we are doing this is because we need to figure out the earnings before taxes which used later in the step to calc Net Income
Revenue - 6,680,000
Expenses - 5,180,000
Earnings before taxes 1,500,000
Step 2 - next use the tax rate to calc the income tax expense
Earnings before taxes 1,500,000
Tax rate 30%
Income tax expense 450,000
Step 3 - we need to calc the net income so we are going to first subtract the earnings before taxes and then income tax expense
Earnings before taxes 1,500,000
Income tax expense 450,000
Net Income - 1,050,000
Step 4 - final step we now add the Net income along with the retained earnings Appropriated
retained earnings Unappropriated
Net Income - 1,050,000
RE Appropriated 160,000
RE Unappropriated 900,000
Retained Earnings 2,110,000
31
What are the comprehensive basis of accounting?
- a basis that the reporting entity uses to comply with the requirements or financial reporting provisions of a regulatory agency
- basis of used for tax purposes
- the cash basis, and modifications of the cash basis having substantial support, such as recording depreciation on fixed assets or accruing income taxes
- a definite set of criteria having substantial support that is applied to all material items
32
under the cash basis of accounting what amount is the net revenue that should be reported for the current year?
Cash Sales
Gross 80,000
Return and allowance 4,000
Total 76,000
Credit Sales
Gross 120,000
Discounts 6,000
Total 114,000
Cash Collection
Customers owned 40,000
Customers owed Eagles 30,000
Net Credit Sales 10,000
76,000 + 114,000 + 10,000 = 200,000
33
How to calc the current year change stockholders equity?
Total Assets
70,000
75,000
= (5,000)
Current liabilities 42,000
non current liabilities 10,000
= 32,000
=32,000 + 5,000 = 37,000
34
How to calc other comprehensive income?
Remember for OCI included all items of comprehensive income not net income. Net Income is excluded
So Deferred gain on highly effective cash flow hedge 8000
Foreign currency trans gain. 2,000
Unrealized holding loss AFS debt securities 5000
8000 + 2000 - 5000 = 5000
35
If a material event that is unusual in the nature or infrequent in occurrence should be reported on both the income statement and component of income?
must be reported as seperate component of income from continuing operations. It can't be reported on the face of the income statement net of income tax
36
Calc the year 2 single step income statement, reported as total revenue?
For the single income statement it puts Revenue and gains and expenses and losses
Revenues includes things such as sales of goods, services and rentals, purchase discounts
So for the problem we only include Sales which was 250,000
37
Calc balance sheet total assets reported?
Here we doing the A = L+E
Liability is 94,000
Equity - Common Stock - 500,000
Net Income - 25,000
Cash Dividends - (2,000)
Equity - 523,000
A 617,000 = L = 94,000 E = 523,000 =
38
Calc comprehensive income?
remember we need to first
Net Income - 400,000
Forei currency tran gain 100,000
Unrealized holding gains on AFS debt securities 20,000
400,000 + 100,000 + 20,000 = 520,000 Comprehensive income
39
Under the accural accounting method when is revenue
revenue is recognized when revenue is earned so even if service was completed but you didn't receive the payment
40
under the cash basis of accounting when is revenue recognized?
cash is received or paid respectively
41
How to calc the cash basis income for the first year of operations?
Remember when calc cash basis of accounting you need to know the diff between revenue and expenses. Be sure to look for items received or paid
Step 1 - First we need to know the revenue in the problem that involves cash is (received or paid)
Sales on account 1,000,000
AR 100,000
Revenue 900,000
Step 2 - calc the expense portion where inventory purchase 400,000 and accounts payable 50,000 = 350,000
Step 3 - is subtract the revenue of 900,000 and expenses of 350,000 along with other expenses of 200,000 which gaves us a total of 350,000
42
Company is under the cash basis net income, calc the accrual basis net income?
when reconciliation of accrual basis of net income to the cash basis net income
everything would be the opposite
if there is increase you would (subtract) instead. If it's increase it's (Decrease)
For an examples
Net Income 75,000
AR JAN 15,000
DEC 20,000
Difference (5,000)
Prepaid Expense 7000 - 4000 = 3000
Accrued liabilies 2500 - 2000 = 500
Net Income 75,000
AR 5,000. Opposite
Prepaid exp (3,000) Opposite
Accrual liabilities 500
Accrual basis net income 77,500
43
Comprehensive income is best defined as
change in net asset for the period excluding owners transactions
44
How to calc the current liabilities?
AP 55,000
Unsecured notes 400,000
Senior Bonds 1,000,000
Accured Exp. 35,000
Current liabilities 1,490,000
45
What are the steps of creating a Financial statement such as Balance Sheet?
Step 1 - To create a trail balance where where we need to set up items into accounts.
Step 2 - Identify the accounts
Assets such as cash, AR, Inventory, prepaid expense
Liabilities what the company owes
Equity - owners stake in the company
Step 3 - Identify the account
Assets identify the current assets which would be items that are within one year
Non-current asset would be assets that can't convert into to cash within one year
Liability identify all liabilities obligation due within one year time frame
Long term liability - debts and obligation due after one year
Equity - items like Common Stock, APIC, Retained Earnings
Next step is to create the BALANCE SHEET
Create Assets list all the assets so that woukld be
Current Assets non-current assets and that should given a total for Assets
Next do the same for current liabilities
List Current liabilities
long term liabilities
Total for liabilities
Finally for equity have all the common stock and RE
Assets equal L+E with the accounting equation
A = L + E
46
What are the steps of creating a Financial statement such as Income Statement?
47
What are the common mistakes made when completing balance sheet?
1 - Not subtracting accumulated depreciation from equipment or buildings
2 - misclassifying short term and long term items current asset be classified as non-current asset
3 - not updating retained earnings
4 - Overlooking outstanding accounts payable and accounts receivable. Incorrectly not including accounts payable when the company owes money and accounts receivable when the company owed money
5 - Incorrect cash balance reporting where the reconcilion cash balance doesn't match the balance sheet balance so it needs to be updated
48
How do you report gain discontinued operations?
you will be using the net concept where the gain of the fixed asset would go to the continuing operations of net income additional not Net of Income tax
49
How to calc Net Income using the mutiple step income statement?
Calc Net Income
Step 1
Net Sales
Gross sales 3,600,000
sales return 34,000
3,566,000
COGS -1,200,000
GROSS PROFIT 2,366,000
Selling and admistrative (500,000)
Operating income 1,866,000
other income (gain) 8000
Income from continuing operations 1,874,000
Income tax expense 562,200 =1,874,000 x 30%
Income before discontinued operations 1,311,800
Gain from discontinued segment (After tax) 2,800
= 4000 * (1-30%)
Net Income 1,314,600
50
If a foreign company exports goods to the US and they decide to settle in that exported foreign company how would they count it as a gain?
Jacob will book a gain if the japanese yen appreciates verus the US dollars
this will cause the US will need fewer dollars to convert into yen to pay noshima that will result in a gain
if it was loss then it would be no point of doing this trade for the japanese
51
Are Retained Earnings and Net Income analogous?
yes they both are analogous (similar)
52
How do you know whether to use the spot rate or forward rate?
spot rate would be more day to day or even something that's in 30 days
Forward rate would be used for long terms in the future
53
How to calc the selling expense?
Advertising 150,000
Freight out 80,000
sales salaries and com. 140,000
Rent for office space. 220,000
/2 =
110,000
Sales salaries and commissions
Total selling expenses 480,000
54
What does the Balance sheet used for?
-Short term solverncy
-Long term solvery (potential growth
55
How to figure out liquidity?
Current assets / current liabilities
56
What is unexpired cost?
it's suposed to appear on the income statement however, it's will appear on the balance sheet since it's an assets
Ex inventory is would be expired asset where later on it would be expenses as COGS to match our expense so that's called the matching principals
57
Formula or way to calc the Income Statement?
All Revenue and gains
- All Expenses and losses
Pretax income
- Income tax expense
Net Income
58
Benefits and drawbacks of Single step income statement?
Benefits are the following:
- You are able to get net income one step
- Every item mentioned is not less or more then the other
Drawbacks
- It doesn't provide a deeper analysis of the business core and incidental business
59
Why are multiple step income statement so important? and why creditors need it
it provide the users a business operating vs non operating items which helps show the value of business and how they're doing and what sales and where the business is making their money
helps with ratio analysis to see how the company margins are compared to prior year or other companies etcs
60
Multiple step income statement formula?
Sales
- COGS
= Gross Profit
- Operating Expense
Operating income
- Nonoperating (gain)and loss
Pretax income
- income tax expense
= Net Income
+/- Discontinued Operations (Net of tax)
= Net Income
61
benefits of accrual basis of accounting?
better to predict future benefits or revenue also better for performance of the business overall.
62
on the income statement when we use the freight out and freight in?
FREIGHT OUT used for Selling Expenses
FREIGHT IN used for material cost
63
Item that are used to calc Operating Expense?
Think about the expenses for a business
Salaries expense (admins)
Salaries expense (Sales)
Rent Expense
Utilies expense
adversing expense
Total Operating Expense
64
where are interest revenue and expense reported on the income statement non banker?
if your a non bank then your interest revenue and interest expense are Nonoperating income on the mutli step income statement
65
Ex of Discontinued Operations for a business
- Disposal of a major geographic area
- Disposal of a major equity method investment > significant influence over another component (Held for Sale) we have do a impairment loss because it's held for sale at book value and we need to cal the impairment loss = NRV - book value = 5 - 9 = 4
Disposal of a major line of business Significant impact on the entity operations and financial results
66
Foreign Exchange rules for Assets and liabilities
ACCOUNT RECEIVABLE
Foreign Currency UP, Assets UP gain which means LOSS
Foreign Currency DOWN, Assets DOWN which means LOSS
ACCOUNTS PAYABLE
Foreign Currency UP, Liabilities UP and there is a LOSS
Foreign Curency DOWN, Liability is DOWN and there is a GAIN
67
Are reclassification of adjustments reported in the footnotes?
No they are not
They are reported in statement where Net income and components of other comprehensive income are presented
this is done mainly to avoid double of comprehensive income
68
Which financial statement is the accumulated other comprehensive income shown?
accumulated total of other comprehensive income is reported on the balance sheet on the "Retained Earmimgs" section
69
How to calc the approximate gain or loss on Jan year 2?
DEC 10 year 1
50,000 1.27 63500
DEBIT CREDIT PURCHASE 63,500
AP 63,500
DEB 31st
50,000 1.27 - 1.22 0.05
2500
DEBIT CREDIT
AP 2500
FOREIGN EXCHANGE TRANSACTION GAIN 2500
JAN 2nd
50,000 0.11
5500
DEBIT CREDIT
AP 61,000
FOREIGN EXCHANGE LOSS
5,500
CASH 66,500
70
Where are the translation gain or losses reported?
Other comprehensive income
71
Where are the remeasurement gain or losses reported?
Net income
72
Purpose of reporting Comprehensive Income?
to report the equity from owners sources.
Comprehensive income represents the changes in equity from nonowners sources
it includes items from Net Income and OCI Other Comprehensive Income
73
Where is the accumulated other comprehensive income reported in the financial statements?
It’s reported on the balance sheet as a reduction of equity
74
Calc the loss a company should report as discontinued operations?
Pretax loss - 135,000
Operating loss - 240,000
Total = 375,000 x (1 - 30%) = 262,500
75
calc the gain or loss from a foreign currency transaction?
Spot rate 0.98 - 1.01 = -0.03
100,000 euros x -0.03 = -3000
76
How to calc the comprehensive income using the multiple step income statement?
Operating income - 135,000,000
Interest expense - 45,000,000
Income before tax 90,000,000
income tax rate. 40%
Income taxes 36,000,000
income operating 54,000,000
Dis operating. 20,000,000
Net income 34,000,000
OCI 3,500,000
Comprehensive 37,000,000
income
77
What item affects are apart of OCI?
- unrealized gains and losses on AFS Debt securities
- gains and losses on cash flow hedging derivatives instruments
- certain foreign currency items
78
How are treasury stock recorded on the statement of financial position?
decreasing on the statement of financial position
79
What are the comprehensive basis of accounting?
- a basis that is reporting entity to comply with regulatory entity for regulatory agency
- basis used for tax purposes
- cash basis and modifications of the cash basis used for tax purposes
- a definite such as recording depreciation on fixed assets basis substantial support
80
Calc loss from the fire which was infrequent but not unusual in the business?
First we need to check was the total Net Income reported from Income Statement.
NI - 74,100
Unreal hold loss AFS 5,400
adjustments from profits
7500
= 87,000 Net Income
81
Where should operating loss be apart of in the income statement?
operating loss or gain should be apart of discontinued component
82
How to calc total equity on the balance sheet?
C/S 600,000
APIC 800,000
R/E Retain Unr. 350,000
Total Equity 1,750,000
Tresury stock 50,000
Net unreal hold. 20,000
Total Equity 1,680,000
83
Calc, the net revenue that should be reported in the current year? using the cash basis of accounting?
Cash Sales
Gross - 80,000
Return & Allowa - 4,000
76,000
Credit Sales
Gross 120,000
Discounts. 6,000
114,000
Customers owned eagles 40,000
Customers owned Eagle
30,000
= 10,000
76,000 + 114,000 + 10,000 = 200,000
84
How to calc total equity?
Common Stock - 600,000
APIC 800,000
(Treasury Stock) 50,000
(AFS Debt security) 20,000
Total equity 1,680,000
85
What does the statement of equity show?
the beginning and ending balance in shareholders equity accounts
86
How to calc other comprehensive income?
OCI includes items of comprehensive income however NOT Net Income
Deferred gain on a highly effective cash hedge 8000
Foreign currency trans 2000
= 10,000
- unrealized holding loss on AFS Debt securities 5000
= 5000
87
calc the amount of expense reported on it's books under the accrual basis?
we start off with the reported expense 35,200
next we off with begin accrual exp 1,650 and begin prepaid exp 1300 = 350
futhermore, we subtracted the ending accrued exp 1200 - 1800 ending preapid expense -600
35,200 - 350 expense payable + 600 expense payable = 34,250
88
How to calc the cost of goods manufacuring?
we start with the cost of goods sale 60,000
take away the begin inventory 100,000 and add the ending inventory which will give you
60,000 -100,000 + 90,000 = 50,000
89
Calc, Selling expense?
Adversing 150,000
Freight out 80,000
sales salaries and commissions 140,000
Total selling expense 480,000
90
How to calc the accrual basis expense amount?
Step 1
To calc the expense amount under the accrual basis we need to first subtract the (Begin accrued exp) 1650 - 1300 (begin prepaid exp) = 300
Step 2
we need to subtract the (Ending accrual exp 1200 - 1800 ending prepaid exp = -600
Step 3
Now we subtract the diff of begin prepaid/accrured exp 350
add the negative ending prepaid/accured exp -600
350
35,200
-600
= 34,250 accrual basis exp
91
How to calc the selling expense?
TO calc the selling exp we know and find the following items
Adversing 150,000
Freight out 80,000
Salaries 140,000
Rent 220,000 / 2 110,000
= Selling Expense - 480,000
92
The regulation disclosure requirement of the SEC
the requirement for filing financial statement and pro forma financial information
93
Doers a new obligation incurred or equity securities issued need to be disclosured?
Yes
94
the purpose of reporting comprehensive income?
to summarize all changes in the equity from nonowners sources
95
items that are requried to be disclosured in the summary of significant accounting policies
1 - basis of consolidation
2- depreciation methods
3 - amortization of intangible assets
4 - inventory pricing
5 - recognition of profits on long term construction type contracts
6 -recogniztion revenue from franchsing lesing operations
7 - cash equivalents
96
Should all businesses and non for profit entites disclose all significant accounting policies as integral part of F/S?
YES, bc they should be disclosed to all significant accounting policies as integral part
97
Are disclosure of information about significant concentrations of credit risk is required?
For most financial statements which are disclosed to the notes to the financial statements
98
What are the levels of the Fair Value hierchy?
level 1 - unadjusted quoted prices for identical assets
Level 2 - Quoted prices for similar assets and liability in the market that are active
Level 3 - unobservable inputs for the asset
99
What are the 3 valuation techniques?
Market approach - valuation based on information such as prices from market transactions
Income approach - current market expectation about future amounts
The cost approach - cost based on replacement cost to buy or build a comparable assets
100
What is the component of other comprehensive income?
Cumulative currency translation adjustments
101
A transaction that unusual in nature or infrequent in ocurrence should be reported?
reported as a separate component of income from continuing operations
102
Calc the Cost of goods manufacuring?
the opposite of the COGS method where we add beginning inventory and subtract ending inventory
COGS 60,000
Begin Purchase 100,000
Ending Inventor 90,000
= 50,000
103
What does the statement of equity show?
Reconciliation of the beginning and ending balance in shareholders equity accounts
104
When there is change in reporting entity how is that reported?
retrospective in the financial statement
105
Calc the Cash Basis income/loss from operations at year end?
Cash Sales - 1,200,000
Paid 1,300,000
income/ 100,000
loss
106
Estimate the standalone selling price of performance obligation in contract with customers
Adjustment market assessment and expected cost plus an appropriate margin are both used to estimate the standalone selling price
107
non comprehensive basis of accounting other than generally acceptable accounting principles?
basis of accounting that require lending institution aren't comprehensive basis of accounting
108
examples of comprehensive basis of accounting other than generally accounting principals?
Cash basis of accounting
income tax returns
109
examples of OCI?
1 - Unrealized gains and losses on investments in debt securities
2 - gains and losses derivaties designated qualitfied as cash flow hedges
3 - foreign currency translation adjustments
4 - FV attributable to specific credit risk of liabilities
110
Calc, the comprehesive income that should be reported in the current year?
remember comprehesive income items include Net income and items of OCI
Net income 86,500
AFS Debt 8,100
Foreign trans. 3,400
= AFS Debt 8100 - 3400 = 4700 x 30% = 3290
= 86,500 - 3290 = 83,210 Comprehensive income
111
Are interest and adversing included in general adminstrative expense?
Interest and adversing are not included in General & adminstrative
112
Calc the selling expense for the sales department?
Adversing 150,000
freight out 80,000
salaries commis 140,000
rent 110,000
Total selling expense = 480,000
113
A gain or loss from a transaction that is unusual in nature or infrequent in occurence should be reported seperately as a component of income?
before the results of discontinued operations
114
Calc the commission expense?
To calc the commission expense we need to first find and use the net sales which is 1,500,000 x 3% = 450,000
115
Calc the net income for year 6?
Step 1
Assets 356,000
liability 108,000
248,000
Capital stock 240,000
APIC 24,000
DIVIDENDS 52000
212,000
NET INCOME 36,000
116
Treasury stock is recorded on the statement of financial position
as a decrease
117
Calc the selling expenses for the operating expenses?
Freight out - 80,000
Rent for office. 220,000 / 2 =
110,000
Sales salaries & Commissions
140,000
Adversing 150,000
= Selling expense 480,000
118
Calc the accrual basis of net income ? When the company is using the cash basis
Going from Accrual basis to cash basis of net income we need to do the following
If there is an increase in AR in cash basis of net income you would add to Net income
20,000 - 15,000 = increase so add AR to Net income
Net income 75,000 + 5000 = 80,000
Next, decrease to prepaid expense you would subtract it from net income
Net income 75,000 + 5000 = 80,000 - 3000 = 77,000
Finally, decrease to accrued liability you would add it from net income
Net income 75,000 + 5000 = 80,000 - 3000 = 77,000 +500 = 77,500
119
Calc, the operating expense for the accrual basis operating expenses?
When there is an increase in expense 15,000 - 10,000 = 5,000 you would subtract the (5000)
When there is a liabilities increase 20,000 so that is added to the net income 20,000
Net Income 175,000
prepaid exp. (5,000)
accrued liab 20,000
Accrual basis operating expense 165,000
120
Is Accumulated other comprehensive income reported in the income ?
Accumulated other comprehensive income is reported in the equity section of the balance sheet which is coming from the equity separate from retained earnings and additional paid in capital
121
Calc, net income for the income statement?
Net income 74,100
Unrealized AFS 5,400
Depreciation 7,500
= 87,000 net income
122
Calc, the equity in the financial statements?
Common stock 2,224,000
Retained Earnings (224,000)
treasury stock. (300,000)
= 1,700,000
123
calc, the total current asset?
Revenue 3,600,000 - 2,600,000 = 1,000,000
1,000,000 x 30% = 300,000 income tax expense since we calc this the prepaid tax is removed
Cash 550,000
AR. 1,650,000
Receivable 250,000
1,950,000 total current assets
124
Comprehensive income is best defined as
The change in net asset for the period excluding owner transactions
125
Calc, the accrual basis net income?
Net Income - 75,000
Accounts Receivable = 20,000 - 15,000 = 5,000
Prepaid Expense = 7000 - 4000 = 3000
Accrual liabilities = 2500 - 2000 = 500
75,000 + 5000 - 3000 + 500 = 77,500
126
Calc, the amount that should be as interest expense?
Reported cash paid for interest of 70,000 accrued interest payable decrease 17,000 (is a prior period expense and the current period cash outflow so that needed to be subtracted)
with the prepaid interest a prior period cash outflow and a current period expense is (added)
70,000 - 17,000 + 23,000 = 76,000
127
