income statement

Question 1

Purpose and use of I/S

Answer 1

determine

• profitability
• value for investment purposes
• credit worthiness
• predicting information about future cash flows

Question 2

unexpired cost

Answer 2

cost that will expire in future periods and be matched against revenues from future periods

ex) inventory (unexpired)———COGS (expired)

Question 3

gross concept

Answer 3

Revenues reported at gross less allownaces and discounts

Expenses recorded at gross

Question 4

net concept

Answer 4

Gains/Loss reported at net amount (proceeds less NBV.

Question 5

what is a gain

Answer 5

recognition of an asset not in the ordinary course of business

or without the incurrence of an expense

Question 6

what is a loss

Answer 6

cost expiration no in the ordinary course of business

or with the generation of revenue

Question 7

what is included in income from continuiing operations

Answer 7

operting/non operating/ tax

Question 8

benefit of multiple step IS

Answer 8

enhanced user information

Question 9

what is included in discountinued operations

Answer 9

1) impairment loss
2) gain/loss from actual operations
3) gain/loss on disposal

Question 10

component of an entity

Answer 10

lowest level for which operations and cash flows can be distinguished, operationally and for financial reporting purposes

US GAAP

1) operating segment
2) reportable segment
3) reporting unit
4) subsidiary
5) an asset group

IFRS

1) a seperate major line of business or geographic are of operations
2) a subsidiary acquired soley to resel

Question 11

what is a business

Answer 11

an integrated set of activities and assets that is conducted and managed for hte purpose of p[roviding a return to investors/owners

Question 12

nonprofit activity

Answer 12

set of activities and assets used to provide BENEFITS, not goods or services, for the purpose to fulfill the mission of the entity

Question 13

criteria to meet as HELD FOR SALE

Answer 13

1) committed plan
2) avitivly locate a buyer
3) sale probable within 1 year
4) no sig changes to alter plan
5) available NOW
6) sale being marketed

Question 14

definition of directly related

Answer 14

1) demonstrated cause and effect relationship

2) occur no later than 1 year after disposal

Question 15

what is a component held for sale recorded at

Answer 15

FV-cost to sell

Question 16

Exit and disposal cost recorded as a liability

Answer 16

1) involuntary employee termination benefits
2) terminate contract
3) consoloidate facilities
4) relocate emplyees

Question 17

criteria to record liability of exit and disposal

Answer 17

event occurred and we have to pay and we cant get out of it

• liability measured at FV

Question 18

Examples of change in accounting estimates

Answer 18

• lives of fixed assets
• adj of year end accrual of officers salaries/bonuses
• write down of obsolete inventory
• nonrecurring IRS adj
• settlment of litigation
• change in acct principle inseperable from estimate ex- installment to immediate recognition

Question 19

change in accounting principle

Answer 19

RETROSPECTIVE

indirect effect - nondiscretionary items based on earnings ex) bonuses that would have occured

**adj beginning RE of earliest period presented / and if prior f/s are presented they should be restated.