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Notes 13

Notes 13 - I/S is period of time Should not be surprising...

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Income Statement: Basic Format What comes after tax expense? o Discontinued operations o Extraordinary items: One-time Not expected to happen again o Cumulative effect of change in accounting principle: Inventory (LIFO/ FIFO) effect on I/S: o During inflation, LIFO increases CGS How much of reduction in NI can be attributed to LIFO? o What is excess of FIFO inventory over LIFO inventory at beginning of year and at end of year?
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Unformatted text preview: I/S is period of time Should not be surprising if gap is getting larger b/c of inflation o Formula: Take CGS under LIFO and convert to FIFO Excess FIFO inventory: • Beginning of year inv. + End of year inv. = CGS (FIFO) Impact on NI: • CGS (LIFO) – CGS (FIFO) = change in NI • A checklist for earnings quality on I/S: o There are some adjustments we can make to earnings...
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