Income Statement/Statement of Profit and Loss Flashcards
increase in raw materials inventory represents the amount of inventory…
purchased but not used
decrease in finished goods inventory represents the amount of inventory…
sold in excess of inventory manufactured
what is comprehensive income?
net income + other comprehensive income (OCI)
what is net income equal to?
operating income (rev-exp) + non-operating income less tax
what is other comprehensive income (OCI)?
transactions that impact a company economically but have not been realized; includes those that can distort net income
for foreign currency transactions what calculations do you do on the transaction date?
record transaction in functional currency using the transaction date spot rate
for foreign currency transactions what calculations do you do on the balance sheet date?
-remeasure transaction using balance sheet spot rate
-recognize gain or loss income for difference
in rate from transaction date to balance sheet
for foreign currency transactions what calculations do you do on the settlement date?
recognize gain or loss income for difference
in rate from balance sheet date to settlement date
-settle transaction in foreign currency
gain or loss will result if the spot rate on the ________ date is different from the rate used on the ________ date
settlement
transaction
what is a forward contract?
when two parties agree to exchange an underlying asset in the future at a fixed price
this is when day rates come into play
what is foreign currency translation?
when the functional currency of a foreign subsidiary differs from the parent’s reporting currency, F/S accounts
are translated during consolidation
how are foreign currency translation gains and losses recognized?
as a separate component of SE (OCI)
how are remeasurement gains and losses recognized?
in income
what is discontinued operation?
when an entity plans to sell/dispose of a component of business and the held for sale criteria are met OR when a component is sold/disposed of during the period
what is the criteria for a component to be “held for sale”?
-component is in a condition to sell
-component is available to sell
-action to complete the disposal plan have been
initiated and a buyer is actively sought
-sale is probable and expected to be complete within one year
-component is marketed at a reasonable price
TRUE OR FALSE
expected losses from discontinued operations are not included in the F/S until they occur
TRUE
TRUE OR FALSE
expected disposal loss may be indirectly recognized through impairment testing and writing down a component to fair value
TRUE
how are components measured?
the lower of carrying value or fair value less disposal costs
when is revenue recognized?
when the services are provided
under expense recognition…
assets used to earn revenue are expensed (like COGS, depreciation)
what is inventory’s intended use?
to be sold to customer, so when its sold, its recorded as COGS
during the life span of physical long term assets, a portion of revenue that is earned throughout the use they gave that year is….
depreciated as depreciation expense which is a selling expense (apart of selling, general and admin expenses)
