Elements of the Income StatementGains– Increases in equity (net assets) from peripheral or incidental transactions.Losses- Decreases in equity (net assets) from peripheral or incidental transactions.LO 2 Describe the content and format of the income statement.
4-10Format referred to as multiple-step income statement.Separates operating transactions from nonoperating transactions.Matches costs and expenses with related revenues.Highlights certain components of income that analysts use assessing financial performance.Format of the Income StatementIntermediate ComponentsLO 3 Prepare an income statement.
4-11Common for companies to present some or all of the following sections and totals within the income statement.1.Operating section 2.Nonoperating section3.Income tax4.Discontinued operations5.Extraordinary items6.Noncontrolling interest7.Earnings per shareIntermediate ComponentsLO 3 Prepare an income statement.
4-12CABRERA COMPANYIncome StatementFor The Year Ended December 31, 20141. Operating Section 2. Nonoperating Section 3. Income tax Multiple-StepIllustration 4-2
4-13Condensed Income StatementsIllustration 4-3LO 3 Prepare an income statement.
4-14RevenuesExpensesNet IncomeSingle- StepSingle- StepNoimplication that one type of revenue or expense item has priority over another.Single-Step Income StatementsFormat of the Income StatementIllustration 4-5LO 3 Prepare an income statement.
4-15Sales96,500$ Cost of goods sold60,570Gross profit35,930Administrative expense:Operating Expenses:Officers' salaries4,900$ Selling expense17,150Depreciation 3,960Administrative exense8,860Cost of goods sold60,570Total operating expenses26,010Rent revenue17,230Income from operations9,920Selling expense:Other revenue (expense):Freight-out2,690Rent revenue17,230Sales commissions7,980Interest expense(1,860)Depreciation 6,480Total other15,370Sales96,500Income before tax25,290Income tax9,070Income tax9,070Interest expense1,860Net income16,220$ Income StatementFor the year ended Dec. 31, 2014Illustration (E4-5): Prepare a income statement from the data below using the multiple-step form.Format of the Income StatementAdvance slide in presentation mode to reveal answers.LO 3 Prepare an income statement.
4-16A separation of operating and non operating activities of a company exists in Questiona.both a multiple-step and single-step income statement. b.a multiple-step but not a single-step income statement.c.a single-step but not a multiple-step income statement.d.neither a single-step nor a multiple-step income statement.Format of the Income StatementLO 3 Prepare an income statement.
4-17Companies are required to report unusual and irregular items as part of net income so users can better determine the long-run earning power of the company.These income items fall into four general categories:1.Unusual gains and losses.2.Discontinued operations.3.Extraordinary items.4.Noncontrolling interest.