ch04-1 - 4-11.Understand the uses and limitations of an...

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Unformatted text preview: 4-11.Understand the uses and limitations of an income statement.2.Prepare a multiple-step income statement.3.Explain how to report irregular items.4.Explain intraperiod tax allocation.5.Identify where to report earnings per share information.6.Prepare a retained earnings statement.7.Explain how to report other comprehensive income.Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives4-2ElementsSingle-stepMultiple-stepCondensed income statementsIncome StatementFormat of the Income StatementReporting Irregular ItemsSpecial Reporting IssuesUsefulnessLimitationsQuality of EarningsDiscontinued operationsExtraordinary itemsUnusual gains and lossesChanges in accounting principlesChanges in estimatesCorrections of errorsIntraperiod tax allocationEarnings per shareRetained earnings statementComprehensive incomeIncome Statement and Related InformationIncome Statement and Related InformationIncome Statement and Related InformationIncome Statement and Related Information4-3Evaluate past performance.Income StatementIncome StatementIncome StatementIncome StatementLO 1 Understand the uses and limitations of an income statement.Help assess the risk or uncertainty of achieving future cash flows.Predicting future performance.Usefulness4-4Income StatementIncome StatementIncome StatementIncome StatementLimitationsLO 1 Understand the uses and limitations of an income statement.Companies omit items that cannot be measured reliably.Income is affected by the accounting methods employed.Income measurement involves judgment.4-5Companies have incentives to manage incometo meet or beat Wall Street expectations, so thatmarket price of stock increases andvalue of managers stock options increases Income StatementIncome StatementIncome StatementIncome StatementLO 1 Understand the uses and limitations of an income statement.Quality of earningsis reduced if earnings management results in information that is less useful for predicting future earnings and cash flows.Quality of Earnings4-6Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income StatementLO 1 Understand the uses and limitations of an income statement.Revenues Inflows or other enhancements of assets or settlements of its liabilities that constitute the entitys ongoing major or central operations.SalesFee revenueInterest revenueExamples of Revenue AccountsElements of the Income StatementDividend revenueRent revenue4-7Format of the Income StatementFormat of the Income StatementFormat of the Income StatementFormat of the Income StatementLO 1 Understand the uses and limitations of an income statement.Expenses Outflows or other using-up of assets or incurrences of liabilities that constitute the entitys ongoing major or central operations....
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ch04-1 - 4-11.Understand the uses and limitations of an...

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