Chapter 6 Homework Study questions

Chapter 6 Homework Study questions - Chapter 6 Analyzing...

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Chapter 6 Analyzing Operating Activities REVIEW Income is the residual of revenues and gains less expenses and losses. Net income is measured using the accrual basis of accounting. Accrual accounting recognizes revenues and gains when earned, and recognizes expenses and losses when incurred. The income statement (also referred to as statement of operations or earnings) reports net income during a period of time. This statement also reports income components-- revenues, expenses, gains, and losses. We analyze income and its components to evaluate company performance, assess risk exposures, and predict amounts, timing, and uncertainty of future cash flows . While "bottom line" net income frames our analysis, income components provide pieces of a mosaic revealing the economic portrait of a company. This chapter examines the analysis and interpretation of income components. We consider current reporting requirements and their implications for our analysis of income components. We describe how we might usefully apply analytical adjustments to income components and related disclosures to better our analysis. We direct special attention to revenue recognition and the recording of major expenses and costs. Further use and analysis is made of income components in Part Three of the book.
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OUTLINE Income Measurement Concept of Income Measuring Accounting Income Alternative Classification and Income Measures Non-recurring items Extraordinary Items Discontinued Operations Accounting Changes Special Items Revenue and Gain Recognition Guidelines for Revenue Recognition Uncertainty in Revenue Collection Revenue When Right of Return Exists Franchise Revenues Product Financing Arrangements Revenue under Contracts Analysis Implications of Revenue Recognition Deferred Charges Research and Development Computer Software Expenses Exploration and Development Costs in Extractive Industries Supplementary Employee Benefits Employee Stock Options Interest Costs Income Taxes Appendix 6A Earnings per Share: Computation and Analysis Appendix 6B Economics of Employee Stock Options
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Explain the concepts of income measurement and their implications for analysis of operating activities. Describe and analyze the impact of non-recurring items - including extraordinary items, discontinued segments, accounting changes, and restructuring charges and write-offs. Analyze revenue and expense recognition and its risks for financial analysis. Analyze deferred charges, including expenditures for research, development, and exploration. Explain supplementary employee benefits and analyze disclosures for employee stock options (ESOs) Describe and interpret interest costs and the accounting for income taxes. Analyze and interpret earnings per share data (Appendix 6A).
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Chapter 6 Homework Study questions - Chapter 6 Analyzing...

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