Econ 3A - Notes #2

Econ 3A - Notes #2 - g Income before taxes equals Income...

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Econ 3A – Notes #2 Income Statement Presentation and Analysis (Ch. 5) 1. Formats a. Single-step: one step: REVENUES – EXPENSES = N/I b. Multiple-step: analytical arrangement highlighting i. Gross profit ii. Income from operations iii. Net income 2. Major multiple-step income statement components a. Sales or revenues: shown net of Sales returns and allowances and Sales discounts b. Gross profit (or Gross margin): equals Net sales less Cost of goods sold c. (Detail not shown, but recall: COGS = Beginning inventory + Cost of goods purchased – Ending inventory) d. Operating expenses: relate to everyday revenue-producing activities, such as marketing, selling, administrative, research and development, etc. e. Income from operations: equals Gross profit less Operating expenses f. Other income and expenses: relate to non-operating items. i. Financial income and expense ii. Gains and losses (distinguished from revenues and expenses) 1. IE: Pizza parlor sells pizza truck iii. “Other other” – government is the “silent partner” in all businesses
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Unformatted text preview: g. Income before taxes: equals Income from operations plus or minus net of Other income and expenses h. Income taxes: are federal, state, and foreign taxes based on income (current tax level is 35%) i. Net income or Net earnings (or loss): is the so-called bottom-line j. Other special items shown “below the line”: are discontinued operations, extraordinary items, and accounting changes 3. Profitability Analysis a. Percentage Changes i. Total revenues ii. Operating income b. Ratios i. Gross profit ii. Profit margin Exam #2: Monday, 2/23/2009 1. What to bring a. Blue book b. Calculator c. Writing utensil d. 8.5 x 11 double-sided learning tool 2. Content a. Chapter 4 i. Conceptual framework, especially revenue recognition and matching ii. Cash to and from accrual iii. Adjusting journal entries b. Chapter 5 i. Merchandising transactions – perpetual ii. Computation of COGS – periodic iii. Income statement analysis 3. Format a. 6 problems – 100 points total...
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Econ 3A - Notes #2 - g Income before taxes equals Income...

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