Premium Essay

Intermediate Accounting

In: Business and Management

Submitted By lalaaliluya
Words 4342
Pages 18
CHAPTER 4

INCOME STATEMENT AND RELATED INFORMATION

IFRS questions are available at the end of this chapter.

TRUE-FALSe—Conceptual

Answer No. Description

T 1. Usefulness of the income statement. F 2. Limitations of the income statement. F 3. Earnings management. T 4. Transaction approach of income measurement. T 5. Single-step income statement. T 6. Revenues and gains. F 7. Multiple-step vs. single-step income statement. F 8. Multiple-step income statement. T 9. Multiple-step vs. single-step income statement. F 10. Current operating performance approach. T 11. Reporting discontinued operations. F 12. Reporting extraordinary items. F 13. Irregular items. T 14. Intraperiod tax allocation. F 15. Reporting earnings per share. F 16. Computation of earnings per share. T 17. Prior period adjustments. F 18. Retained earnings restrictions. F 19. Comprehensive income definition. T 20. Reporting other comprehensive income.

Multiple Choice—Conceptual

Answer No. Description

c 21. Elements of the income statement. d 22. Usefulness of the income statement. b 23. Limitations of the income statement. d S24. Use of an income statement. d S25. Income statement reporting. c 26. Income statement information. b 27. Example of managing earnings down. c 28. Example of managing earnings up. b 29. Improving current net income. a 30. Decreasing current net income. d 31. Single-step income statement advantage. b 32. Single-step income statement. d 33. Methods of preparing income statements. a 34. Income statement presentation. b 35. Event with no income statement effect. c S36. Net income effect.
Multiple Choice—Conceptual (cont.)

Answer No. Description

b P37. Selling expenses. b P38. Reporting merchandise inventory. a 39. Definition of an extraordinary item. d 40. Classification of an...

Similar Documents

Premium Essay

Intermediate Accounting

...deferredpayment contracts. 12, 14 5, 6, 7 3, 6, 11, 12, 2, 11 13, 14, 15, 16 6. Costs subsequent to acquisition. 18, 19 13 21, 22, 23 7. Alternative valuations. 22 8. Disposition of assets. 23 Copyright © 2013 John Wiley & Sons, Inc. 1 Exercises 1, 2, 3, 5 1, 5, 6 2 1 3 14, 15 24, 25 Kieso, Intermediate Accounting, 15/e, Solutions Manual 4 1 (For Instructor Use Only) 10-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives Questions Brief Exercises Concepts for Analysis Exercises Problems 1, 2, 3, 4, 5, 11, 12, 13 1, 2, 3, 4, 5, 6, 11 CA10-1 4, 5, 6, 11, 12 3 CA10-2 1. Describe property, plant, and equipment. 1 2. Identify the costs to include in initial valuation of property, plant, and equipment. 2, 3, 4, 5, 6, 21 3. Describe the accounting problems associated with self-constructed assets. 8 4. Describe the accounting problems associated with interest capitalization. 8, 9, 10, 11 2, 3, 4 5, 6, 7, 8, 9, 10 5, 6, 7 CA10-3 5. Understand accounting issues related to acquiring and...

Words: 18805 - Pages: 76

Premium Essay

Intermediate Accounting

...INTERMEDIATE (FINANCIAL) ACCOUNTING I SUBCLASS KLM CASE ANALYSIS QUESTIONS CASE 1 – REVENUE RECOGNITION AND EARNINGS MANAGEMENT INTERMEDIATE (FINANCIAL) ACCOUNTING I SUBCLASS KLM CASE ANALYSIS QUESTIONS CASE 2 – REVENUE RECOGNITION FOR A CONSTRUCTION PROJECT HKU Technology Inc. (Hereafter, HKU Tech) is a large construction contracting firm that serves a variety of industrial customers that purchase machinery and equipment from HKU Tech. HKU Tech’s business primarily involves the design and manufacture of large, industrial machinery and tooling that is used by its customers in manufacturing parts and components for fighter jets, transport planes, and other aerospace-related machinery and equipment. All of HKU Tech’s construction contracts involve the design, development, and manufacture of machines that are unique and customized to the specifications of its customers. HKU Tech negotiates all its contracts with its customers on either a fixed-price or cost-plus basis. HKU Tech has developed an accounting policy to recognize revenue related to its customized construction contracts, which is outlined as follows: The Company performs under a variety of contracts, some of which provide for reimbursement of cost plus fees, and others that are fixed-price-type contracts. Revenues and fees on these contracts are primarily recognized on a contract-by-contract basis using the percentage-ofcompletion method of accounting, which is most often based on contract costs incurred to date......

Words: 1474 - Pages: 6

Free Essay

Intermediate Accounting

...Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) has been the assigned organization in a private sector for establishing standards. These standards are important to be useful because it allows investors to make informed decisions. Financial information must be reliable, consistent and transparent. Since 1973, FASB has been part of a structure that’s independent of all other business and professional organizations. The rest of the parts are Financial Accounting Foundation (FAF), Financial Accounting Standards Advisory Council (FASAC), Governmental Accounting Standards Board (GASB) and Governmental Accounting Standards Advisory Council (GASAC). The role of monitoring and controlling business reporting and accounting practices in a modern organization is to establish and improve standards of financial accounting. FASB has a board full of members that participate in accomplishing the mission. There are 7 board members as well as several staff members that help assist. The board members are: * Russell Golden is a chairman. He began in July of 2013. He served six years as a staff member (technical Director) for the FASB before he got appointed to the chairmen. His term will end in 2017, but then he can get an appointment to an additional 3 more years. He is also chaired in FASB’S emerging issues task force. * James Kroeker is the vice chairman. He was appointed in September 2013. He served as the deputy managing partner for......

Words: 2085 - Pages: 9

Premium Essay

Intermediate Accounting

...LP3.2 Assignment: Case Study  Directions Access the financial statements of Proctor & Gamble in Appendix 5B in the textbook to answer the questions found in Chapter 4’s Using Your Judgment-Financial Reporting Problem. Follow the instructions indicated in the case study. Provide answers for parts a-e. Submit this assignment to your instructor via the dropbox “LP3.2 Assignment: Case Study.” This assignment is worth 20 points and will be graded according to the following scoring guide. Rating Scale x Criteria = Total Points Scoring Guide (20 Points) | Rating Scale | 4 | Work meets or exceeds criterion at a high level of competence. | 3 | Work reflects an understanding of criterion with minor misunderstandings/misconceptions. | 2 | Criterion partially met, but one or more important concepts/skills are missing or flawed. | 1 | Work reflects an attempt to meet criterion, but significant misunderstandings/misconceptions are apparent. | 0 | Criterion not met or work is absent. | Criteria | 1. | Identified the type of use of income statement format used by P&G. | 2. | Stated P&G's primary revenue sources. | 3. | Computed P&G's gross profit for 2007-2009 and explained trends to gross profit and financial ratios. | 4. | Provided distinction between operating and non-operating revenue. | 5. | Utilized appropriate grammar, punctuation, and spelling. | Financial Reporting Problem Proctor & Gamble a) What type of income statement......

Words: 484 - Pages: 2

Premium Essay

Intermediate Accounting

...一、资产类 Assets 流动资产 Current assets 货币资金 Cash and cash equivalents 1001 现金 Cash 1002 银行存款 Cash in bank 1009 其他货币资金 Other cash and cash equivalents '100901 外埠存款 Other city Cash in bank '100902 银行本票 Cashier's cheque '100903 银行汇票 Bank draft '100904 信用卡 Credit card '100905 信用证保证金 L/C Guarantee deposits '100906 存出投资款 Refundable deposits 1101 短期投资 Short-term investments '110101 股票 Short-term investments - stock '110102 债券 Short-term investments - corporate bonds '110103 基金 Short-term investments - corporate funds '110110 其他 Short-term investments - other 1102 短期投资跌价准备 Short-term investments falling price reserves 应收款 Account receivable 1111 应收票据 Note receivable 银行承兑汇票 Bank acceptance 商业承兑汇票 Trade acceptance 1121 应收股利 Dividend receivable 1122 应收利息 Interest receivable 1131 应收账款 Account receivable 1133 其他应收款 Other notes receivable 1141 坏账准备 Bad debt reserves 1151 预付账款 Advance money 1161 应收补贴款 Cover deficit by state subsidies of receivable 库存资产 Inventories 1201 物资采购 Supplies purchasing 1211 原材料 Raw materials 1221 包装物 Wrappage 1231 低值易耗品 Low-value consumption goods 1232 材料成本差异 Materials cost variance 1241 自制半成品 Semi-Finished goods 1243 库存商品 Finished goods 1244 商品进销差价 Differences between purchasing and selling price 1251 委托加工物资 Work in process - outsourced 1261 委托代销商品 Trust to and sell the goods on a commission basis 1271 受托代销商品 Commissioned and sell the goods on a commission basis 1281 存货跌价准备 Inventory falling price reserves 1291......

Words: 1473 - Pages: 6

Premium Essay

Intermediate Accounting

...(i) As the plant was acquired for the company’s own use, and thus treat as non-current asset for the company. The plant is a newly addition of non-current assets for Creative. The cost of the newly acquired plant should be recorded in the book at the date of acquisition. [interest expense?] Moreover, the plant was financed by an 8% loan, Depreciation for the year, amounting $500,000 have to be recorded, debiting the Profit and loss account and crediting the Accumulated depreciation account, the amount is calculated on straight line basis, i.e. cost over its useful years, 10 years. For the year ended 2012, the plant have to be carried at cost less accumulated depreciation. As on 31 December, Creative recorded a net book value of Non-current Asset of $4,500,000 under the category of Plant and Machinery. 1/1/12 Addition: Plant $5,000,000 10years Financed by $5,000,000 8%loan 31/12/12 Depreciation: $500,000 NBV=$4,500,000 Journal: 1/1 Dr Plant and equipment $5,000,000 Cr 8% loan $5,000,000 31/12 Dr P&L- Depreciation $500,000 Cr accumulated depreciation $500,000 Dr P&L – Interest expense Cr Interest payable (ii) 1/1/12 Equipment Production unit $10,000,000 20 years Depre: $500,000 Electrical systems $3,000,000 10 years Depre: $300,000 Sub-assemblies $2,000,000 4 years Depre: $500,000 1/1 Dr Equipment $15,000,000 Cr Bank $15,000,000 31/12 Dr P&L – Depreciation...

Words: 729 - Pages: 3

Premium Essay

Intermediate Accounting

...The following information is available for Remmers corporation for 2010. a. Depreciation reported on the tax return exceeded depreciation reported on the income statement by 120,000. This difference will reverse in equal amounts of 30,000 over the years 2011-2014. B. Interest received on municipal bonds was 10,000. C. Rent collected in advance on Jan 1 2010 totaled 60,000 for a 3 year period. Of this amount 40,000 was reported as unearned at Dec 31 for book purposes. D. The tax rates are 40% for 2010 and 35% for 2011 and subsequent years. E. Income taxes of 320,000 are due per the tax return for 2010. F. No deferred taxes existed at the beginning of 2010. 1. Compute taxable income for 2010 2. Compute pretax financial income for 2010 3. Prepare the journal entries to record income tax expense deferred income taxes and income taxes payable for 2010 and 2011. Assume taxable income was 980,000 in 2011. $. Prepare the income tax expense section of the income statement for 2010 beginning with "income before income taxes." (a) X (.40) = $320,000 taxes due for 2010 X = $320,000 ÷ .40 X = $800,000 taxable income for 2010 (b) Taxable income [from part (a)] $800,000 Excess depreciation 120,000 Municipal interest 10,000 Unearned rent (40,000) Pretax financial income for 2010 $890,000 (c) 2010 Income Tax Expense ($320,000 + $42,000 – $14,000) 348,000 Deferred Tax Asset ($40,000 X .35) 14,000 Income Tax Payable ($800,000 X .40) 320...

Words: 336 - Pages: 2

Premium Essay

Intermediate Accounting

...following statements is not an objective of financial reporting? (Points: 5) Provide information that is useful in investment and credit decisions. Provide information about enterprise resources, claims to those resources, and changes to them. Provide the liquidation value of a company. Provide information that is useful in assessing cash flow prospects. 2. (TCO A) The Financial Accounting Standards Board employs a "due process" system which (Points: 5) has all CPAs in the United States vote on a new Statement. enables interested parties to express their views on issues under consideration. identifies the accounting issues that are the most important. requires that all accountants receive a copy of financial standards. 3. (TCO A) The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the (Points: 5) SEC AICPA IASB GASB 4. (TCO A) The cash method of accounting: (Points: 5) is used by most publicly-traded corporations for financial statement purposes. is not in accordance with the matching principle for most publicly-traded corporations. is often used on the income statement by large, publicly-held companies. All of the above is true. 5. (TCO A) Which of the following is an ingredient of relevance? (Points: 5) ......

Words: 831 - Pages: 4

Premium Essay

Intermediate Accounting

...Company Name: GCL-Poly Energy Holdings Limited Stock Code: 3800 To: Albert From: XXX Date: 28/10/2014 Subject: The accounting requirements for leases BACKGROUND | As per our discussion, I have reviewed the consolidated financial statement of the GCL-Poly Energy Holdings Limited for the last year ended 31 December, 2013. For your reference, I would like to answer your question to facilitate your decision of lending the money as an investment that why the leased assets do should be recorded as the company’s assets under the accounting standard even the assets are not under the name of GCL. As per the financial statements, we can extract the following details: Obligation under finance lease – due within one year $654,197 Obligation under finance lease – due after one year $1,416,322 Explanation of accounting treatments In accordance to the IAS 17: Leases, it defines a finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. This means that even if the titles of the assets are not transferred, if the lessee bears the responsibility to the assets’ risks and rewards such as the repairs and maintenances, depreciation and any related expenses, together with the lease term covering the major useful lives of the assets, the company should reflect the assets under the non-current assets. This is more likely to reflect the true and fair financial......

Words: 952 - Pages: 4

Premium Essay

Notes for Intermediate Accounting

...Intermediate Accounting Chapter 1 * Essential characteristics of accounting are (1) the identification, measurement, and communication of financial information about (2) economic entities to (3) interested parties * Financial accounting – process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties * Users – investors, creditors, managers, unions, and government agencies * financial statements – (1) the balance sheet, (2) the income statement, (3) the statement of cash flows, and (4) the statement of owners’ or stockholders’ equity * president’s letter or supplementary schedules in the corporate annual report, prospectuses, reports filed with government agencies, news releases, management’s forecasts, and social or environmental impact statements * Managerial accounting – process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, control, and evaluate a company’s operations * Capital Allocation – process of determining how and at what cost money is allocated among competing interests * Objective of general-purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in decisions about providing resources to the entity. Those decisions involve buying, selling, or holding equity and debt......

Words: 7392 - Pages: 30

Premium Essay

Intermediate Accounting M1

...2013 Units Purchased Units Unit Cost Total Cost 5000 $700 $3,500,000 4000 $800 $3,200,000 Average Cost 6000 $900 $5,400,000 12100000 15000 $12,100,000 15000 $806.67 or $807.00 Compute the gross profit (sales minus COGS) and the profit ratio for 2014 assuming that Cast Iron purchased 28,000 units during the year. Sales for 2014 27,000 units x $2,000 $54,000,000 Gross Profit Gross Profit Ratio COGS for 2014 $54,000,000 31404000 28,000 units x $807 $22,596,000 - $22,596,000 54000000 0.581555556 $31,404,000 Repeat Requirement 1 assuming that Cast Iron purchased only 15,000 units. Sales for 2014 27,000 units x $2,000 $54,000,000 Gross Profit Gross Profit Ratio COGS for 2014 $54,000,000 41895000 15,000 units x $807 $12,105,000 - $12,105,000 54000000 0.775833333 $41,895,000 Why does the number of units purchased affect your answers to the above requirements? The number of units purchased affects the answers to the above requirements because they are using the COGS in all aspects of the calculations. In the gross profit, sales is subtracted by COGS which then changes the gross profit ratio as well. Repeat requirements 1 and 2 assuming that Cast Iron uses the FIFO inventory cost method rather than the LIFO. See above Why does the number of units purchased have no......

Words: 292 - Pages: 2

Premium Essay

Intermediate Accounting Final

...Portfolio Project a. What are the primary lines of business of these two companies as shown in their notes to the financial statements? The Coca-Cola Company’s main line of business consisting of non-alcoholic beverage concentrates and syrups focuses on sparkling beverages such as Coca-Cola, Diet Coke, Fanta, and Sprite. Additionally, the Coca-Cola Company also owns or licenses many other brands including water, juices, coffees, sports, and energy drinks (The Coca-Cola Company, 2007). PepsiCo is broken down into four divisions, each of which maintains a focus on its own business line. Frito-Lay North America makes, sells, and distributes sweet and salty snacks, such as, Lays, Doritos, and Tostitos Chips, Quaker Granola Bars, Grandma’s Cookies, and Cheetos. The PepsiCo Beverages North America division is the producer of beverages such as, Pepsi, Mountain Dew, Tropicana juices, Naked Juices, Izze, and others as well as ready-to-drink coffees and teas. PepsiCo International, similar to the two aforementioned divisions, is responsible for sweet and salty snacks as well as a beverage line. Finally, the Quaker Foods North America division manufactures cereals, rice, and pasta. Familiar brands are Quaker oatmeal, Rice-a-Roni, and Life cereal among others (PepsiCo, 2007). b. Which company has the dominant position in beverage sales? The Coca-Cola Company shows net revenues of $28,857 (in millions) while PepsiCo shows net revenues of $39,474 (in millions) for all of their......

Words: 2131 - Pages: 9

Free Essay

Intermediate Accounting Iii

...Midterm Exam Review 1.The revenue recognition principle provides that revenue is recognized when? Pages 907-8 Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract on each appliance sold. Although Dot Point sells the appliances on an installment basis, all service contracts are cash sales at the time of purchase by the buyer. Collections received for service contracts should be recorded when? An alternative available when the seller is exposed to continued risks of ownership through return of the product is what? Page 910 2. In selecting an accounting method for a newly-contracted long-term construction project, the principal factor to be considered should be what? Page 933 The percentage-of-completion method must be used when certain conditions exist. Review the necessary conditions? Page 912 In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year is what? Page 914 (and Interactive example included in lecture) 3. Melton Construction Co. began operations in 2010. Construction activity for 2010 is shown below. Melton uses the completed-contract method. Contract Contract Price Billings Through 12/31/10 Collections Through 12/31/10 Costs to 12/31/10 Estimated Costs......

Words: 2123 - Pages: 9

Premium Essay

Intermediate Accounting Case

...Emily Schnarr Honors Component Accounting 303 Chapter 3 Accounting, Analysis, and Principles Accounting: 1) Depreciation Expense $9,500 Accumulated Depreciation 9,500 2) Interest Expense 8,250 Interest Payable 8,250 3) Unearned Service Revenue 10,000 Service Revenue 10,000 4) Advertising Expense 2,500 Prepaid Advertising 2,500 5) Salaries and Wages Expense 3,500 Salaries and Wages Payable 3,500 Analysis: Revenues Ticket Revenues $360,000 Expenses Salaries and Wages 67,600 Advertising 18,680 Interest 1,400 87,680 Net Income before Adjustments $272,320 Revenues Ticket Revenues $360,000 Expenses Salaries and Wages 71,100 Advertising 21,180 Interest 9,650 101,930 Net Income after Adjustments $258,070 Amato’s bankers should wait for Amato to adjust their accounts before deciding on the loan renewal for a couple of reasons. If Amato were to show the bankers their pre-adjusted revenues, expenses, and net income, the expenses would be understated by about $14,250, making their net income seem higher than it actually should be. If Amato adjusted their accounts and properly showed all revenues and expenses, their net income would be accurately reported. The bank could then make a better and more feasible decision on whether or not to renew the loan and how much the loan should be. If they had not waited for the adjusted net income, they could have......

Words: 332 - Pages: 2

Premium Essay

Ch1 Intermediate Accounting

...information to be useful there must be a linkage between these users and the decisions they make. This link is a. relevance. b. reliability. c. understandability. d. materiality. 3. Application of the full disclosure principle a. is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits. b. is violated when important financial information is buried in the notes to the financial statements. c. is demonstrated by the use of supplementary information presenting the effects of changing prices. d. requires that the financial statements be consistent and comparable. 4. When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash receipts from customers to determine accrual basis service revenue? a. Subtract ending accounts receivable. b. Subtract beginning unearned service revenue. c. Add ending...

Words: 3652 - Pages: 15