Financial Statements

Question 1

Calculate Gross Profit in the I/S

Answer 1

Sales

-COGS

Question 2

Calculate Operating Income (i.e. income from continuing operations before tax from I/S)

Answer 2

Gross Profit
-Operating Expenses
+/-Other Income/Expense

Question 3

Calculate Income from continuing operations after tax from I/S

Answer 3

Gross Profit
-Operating Expenses
+/-Other Income/Expense
-Tax

Question 4

Calculate NI

Answer 4

=Income From Continuing Operations

+/- discontinued Operations

Question 5

How is gain on sale of a discontinued operation treated?

Answer 5

is not revenue, but should be disclosed below income from continuing operations

Gain on sale of disposal is included to Net Income

Question 6

How is loss on sale of a discontinued operation treated?

Answer 6

does not affect revenue but is disclosed below income from continuing operations

Loss on Sale of disposal is excluded to Net Income

Question 7

How are unusual OR Infrequent Items treated?

Answer 7

GAAP requires these items to be separately reported if material. As a component of income from continuing operation (such as impairment loss)

Question 8

How are unusual AND Infrequent Items treated?

Answer 8

No longer acceptable under GAAP

Question 9

What is the balance sheet equation (accounting equation?

Answer 9

A=L+OE