16IncomeStatementandComprehensiveIncome

16IncomeStatementandComprehensiveIncome - Chapter 4 The...

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The Income Statement The Income Statement and and Comprehensive Income Comprehensive Income Chapter 4
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Expenses Outflows of resources incurred in generating revenues. Revenues Inflows of resources resulting from providing goods or services to customers. Gains and Losses Increases or decreases in equity from peripheral or incidental transactions of an entity. Income from Continuing Operations Income Tax Expense Because of its importance and size, income tax expense is a separate item.
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Operating Income Nonoperating Income Operating Versus Operating Versus Nonoperating Income Nonoperating Income Includes revenues and expenses directly related to the principal revenue- generating activities of the company Includes gains and losses and revenues and expenses related to peripheral or incidental activities of the company
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Income Statement Income Statement (Single-Step) (Single-Step) Expenses { { Revenues { Proper Heading
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Income Statement Income Statement (Multiple-Step) (Multiple-Step) { Non- operating Items { Gross Profit Operating Expenses { MAXWELL GEAR CORPORATION Income Statement For the Year Ended December 31, 2009 Sales revenue 573,522 $ Cost of goods sold 302,371 Gross profit 271,151 Operating expenses: Selling 47,341 $ General and administrative 24,888 Research and development 16,300 88,529 Operating income 182,622 Other income (expense): Interest and dividend revenue 26,400 $ Gain on sale of operating assets 5,500 Interest expense (6,200) Loss on sale of investments (8,322) 17,378 Income before income taxes 200,000 Income tax expense 80,000 Net income 120,000 $ { Proper Heading
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Earnings Earnings Quality Quality Earnings quality refers to the ability of reported earnings to predict a company’s future earnings. Transitory Earnings versus Permanent Earnings
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Manipulating Income Manipulating Income and Income Smoothing and Income Smoothing Two ways to manipulate income: 1. Income shifting 2. Income statement classification
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Operating Income and Earnings Quality and Earnings Quality Restructuring Costs Costs associated with shutdown or relocation of facilities or downsizing of operations are recognized in the period incurred. Goodwill Impairment
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16IncomeStatementandComprehensiveIncome - Chapter 4 The...

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