121_11 - CHAPTER 11 INCOME STATEMENT STOCKHOLDERS EQUITY...

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CHAPTER 11 INCOME STATEMENT STOCKHOLDERS’ EQUITY PREDICT FUTURE PROFITS Good predictors ± Operating income ± Income from continuing operations ± Cash flow from operating activities ± Net income not good predictor PREDICT FUTURE PROFITS Net income bad predictor ± One-time events ± Non-continuing events ± Non-operating events 69 Net income 6 Cumulative effect of change in prin., $10, less inc. tax of $4 (12) Extraordinary loss, $20, less income tax savings, $8 75 N/I before extraordinary item, cum. effect change in principle 21 Discontinued operations, $35, less inc. tax of $14 54 Income from continuing operations 36 Income tax expense 90 Income from continuing operations before income tax 21 Gain on sale of machinery (10) Interest expense Other gains (losses): 79 Operating income 181 Operating expenses 260 Gross margin 240 Cost of goods sold 500 Sales revenue 69 Net income 54 Income from continuing operations 36 Income tax expense 90 Income from continuing operations before income tax 21 Gain on sale of machinery Interest expense Other gains (losses): Operating income Operating expenses 260 Gross margin 240 Cost of goods sold 500 Sales revenue Recurring events One-time events DISCONTINUED OPERATIONS ± Business may have many segments ± Sell a segment ± Gain (loss) on sale of segment
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DISCONTINUED OPERATIONS Two calculations on income statement ± Operating income (loss) for period ±
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This note was uploaded on 10/24/2010 for the course ACCOUNTING 31609 taught by Professor R.ambrose during the Fall '09 term at San Mateo Colleges.

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121_11 - CHAPTER 11 INCOME STATEMENT STOCKHOLDERS EQUITY...

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