Chapter+4 - Multiple-Step Multiple-Step CABRERA COMPANY...

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4-1CABRERA COMPANYIncome StatementFor The Year Ended December 31, 20141. Operating Section 2. Nonoperating Section 3. Income tax Multiple-StepMultiple-StepIllustration 4-2
4-2Condensed Income StatementsCondensed Income StatementsIllustration 4-3LO 3 Prepare an income statement.
4-3RevenuesExpensesNet IncomeSingle- StepSingle- StepNoimplication that one type of revenue or expense item has priority over another.Single-Step Income StatementsFormat of the Income StatementFormat of the Income StatementIllustration 4-5LO 3 Prepare an income statement.
4-4Companies are required to report unusual and irregular items as part of net income so users can better determine the long-run earning power of the company.These income items fall into four general categories:1.Unusual gains and losses.2.Discontinued operations.3.Extraordinary items.4.Noncontrolling interest.LO 4 Explain how to report various income items.Reporting Various Income ItemsReporting Various Income ItemsModified all inclusive conceptModified all inclusive concept
4-5LO 4Reporting Various Income ItemsReporting Various Income ItemsUnusual Gains and LossesThe following items may need separate disclosure in the income statement. 1.Losses on the write-down or write-off of assets.2.Gains or losses from exchange or translation of foreign currencies.3.Restructuring charges.4.Other gains or losses from sale or abandonment of property, plant, or equipment used in the business.5.Effects of a strike.6.Adjustment of accruals on long-term contracts.
4-6Occurs when,(1)company eliminates the results of operations of a component of the business, and(2)there is no significant involvement in that component after the disposal transaction.Amounts reported “net of tax.”Discontinued OperationsLO 4 Explain how to report various income items.Reporting Various Income ItemsReporting Various Income Items
4-7Illustration: KC Products Inc., a highly diversified company, decides to discontinue its electronics division. During the current year, the electronics division lost $300,000 (net of tax). Multiplex sold the division at the end of the year at a loss of $500,000 (net of tax). Show how the discontinued operations would be reported on the income statement for KC Products. Discontinued OperationsDiscontinued OperationsIncome from continuing operations$20,000,000Discontinued operations:Loss from operations, net of tax300,000Loss on disposal, net of tax500,000Net income$19,200,000Total loss on discontinued operations800,000LO 4Advance slide in presentation mode to reveal answers.Illustration 4-8
4-8Discontinued Operationsare reported after“Income from continuing operations.” Without a discontinued operations this line would be “net income.”Illustration 4-9Discontinued OperationsDiscontinued Operations
4-9Extraordinary items are nonrecurring materialitems that differ significantly from a company’s typical business activities.Extraordinary item must meet both of the following criteria: Unusual nature and Infrequently of occurrence

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