Ch13(6th)Post - Operating Operating Activities Activities...

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Unformatted text preview: Operating Operating Activities Activities Chapter Chapter F13 F13 13-2 1. Identify the purpose and major components of the income statement. 2. Explain and apply rules for measuring revenues and receivables and reporting revenue transactions. 3. Describe reporting rules for inventories and cost of goods sold and compare reporting of inventories for merchandising and manufacturing companies. Objectives Objectives 13-3 4. Explain and apply rules for measuring cost of goods sold and inventories and describe the effects of income taxes on the choice of inventory estimation method. 5. Identify routine and nonroutine events that affect a companys income statement. Objectives Objectives 13-4 Basic Operating Activities Basic Operating Activities The income statement reports the results of operating activities for a fiscal period on an accrual basis. Obj - 1 13-5 For the Year Ended December 31, 2008 2007 Net sales revenue $3,235,600 $686,400 Cost of goods sold (1,954,300 ) (457,600 ) Gross profit 1,281,300 228,800 Selling, general and administrative expenses (1,094,700 ) (148,300 ) Operating income 186,600 80,500 Interest expense (20,400 ) (4,800 ) Pretax income 166,200 75,700 Income taxes (49,860 ) (22,710 ) Net income $ 116,340 $ 52,990 Earnings per share $ 0.29 $ 0.13 Exhibit 1 Exhibit 1 Income Statement for Favorite Cookie Company Obj - 1 13-6 Sales of goods and services to customers Activity Operating revenues Income Statement Cash Accounts Receivable Balance Sheet Cash received from customers Statement of Cash Flows Exhibit 2 Exhibit 2 The Effect of Sales and Services on the Financial Statements Obj - 2 13-7 Revenue Recognition Revenue Recognition 1. The selling company has completed most of the activities necessary to produce and sell the goods or services. 2. The selling company has incurred the costs associated with producing and selling the goods or services or can reasonably measure those costs. 3. The selling company can measure objectively the amount of revenue it has earned. 4. The selling company is reasonably sure that it is going to collect cash from the purchaser. Obj - 2 13-8 Recognizing Revenue for Recognizing Revenue for Long-Term Contracts Long-Term Contracts Constructo, Inc. contracts to construct a new building for $20 million, and the project will take three years. Constructo, Inc. estimates at the end of the first year, 2007, 20 percent of the work has been completed. For the fiscal period ending in 2007, Constructo, Inc. will recognize revenue of $4 million (20% of $20 million). Obj - 2 13-9 Sales Discounts and Returns Sales Discounts and Returns Revenues are reported on the income statement net of discounts and expected returns. A quantity discount is a reduction in the normal sales price to encourage customers to buy large quantities of goods....
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This note was uploaded on 09/04/2008 for the course ACC 310F taught by Professor Verduzco during the Spring '07 term at University of Texas at Austin.

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Ch13(6th)Post - Operating Operating Activities Activities...

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