ch4 solutions - Gibson, Financial Reporting &...

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Unformatted text preview: Gibson, Financial Reporting & Analysis, 11e Chapter 4 Income Statement TO THE NET 1. a. $68,300,000 b. $10,325,000 loss Equity earnings (losses) are the investors proportionate share of the investees earnings (losses). 2. a. Net sales $10,711,000,000 (2006); $8,490,000,000 (2005); $6,921,000,000 (2004) b. Gross profit $2,456,000,000 (2006); $2,039,000,000 (2005); $1,602,000,000 (2004) c. Income from operations $389,000,000 (2006); $432,000,000 (2005); $440,000,000 (2004) d. Interest expense $78,000,000 (2006); $92,000,000 (2005); $107,000,000 (2004) e. Material improvement in net sales, gross profit, and interest expense. Major problems in income from operations. There may be some future benefit from the expenditure for technology and content. 3. a. Equity in income of real estate affiliates Equity earnings (losses) are the investors proportionate share of the investees earnings (losses) b. Yes Income from continuing operations was $96,000,000. Income from discontinued operations, net of income taxes was $26,000,000. c. Gain on insurance settlement $5,000,000 d. Ocean transportation e. Cost of ocean transportation services 74 Gibson, Financial Reporting & Analysis, 11e 4. a. Goodwill arises from the acquisition of a business for a sum greater than the physical asset value, usually because the business has unusual earnings. b. An impairment review is required by SFAS No. 142. Any impairment charge would go on the income statement. c. The amount for goodwill is reduced on the balance sheet and taken to the income statement. No cash is involved in this entry. 5. a. Occidental Petroleum A separate statement of comprehensive income b. El Paso Corporation Presented as part of the statement of stockholders equity c. Arden Group, Inc. Presented at the bottom of the income statement Presentation at the bottom of the income statement should be best for the user. This should help the reader understand the difference between net income and comprehensive income. 6. a. IFRS model income statement by function has the following items: Revenue sales Cost of gross profit Gross profit Investment revenue Other gains and losses Share of profits of associates Distribution expenses Marketing expenses Occupancy expenses Administration expenses Finance costs Other expenses This represents a finer line item disclosure than under U.S. GAAP. Many of the items are similar but with an IAS describing what goes in each function. For example, U.S. GAAP has other gains and losses but the content may be different than under IFRS. 75 Gibson, Financial Reporting & Analysis, 11e b. IFRS model income statement by nature has the following items: Revenue Investment revenue Other gains and losses Share of profits of associates Changes in inventories of finished goods and work in progress Raw materials and consumable goods Employee benefits expense Depreciation and amortization expense Finance costs Consulting expense Other expenses This represents a finer line item disclosure than under U.S. GAAP. This represents a finer line item disclosure than under U....
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ch4 solutions - Gibson, Financial Reporting &...

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