Exam 5: The Income Statement and the Statement of Cash Flows

The following accounts are taken from the accounting records of Dory Company at December 31, 2013, after adjustments: In addition, the following information is available: 1In addition, the following information is available: •The inventory on December 31, 2013, was $75,000. •Ten thousand shares of common stock were outstanding during the entire year. Dory paid dividends of $1.00 per share. •At the end of October, Dory sold its unprofitable restaurant component. From January through October, the component had incurred an operating loss (pretax) of $14,000. The sale was made at a loss (pretax) of $8,000. •In November, the company sold the only land it ever owned for a gain of $10,000. •The applicable tax rate is 30%. Required: Prepare a 2013 multiple-step income statement for the Dory Company.

A company is not required to follow a specific format in making the disclosures for its segments but FASB encourages the most useful format for its specific circumstances.

In accrual accounting, net income is defined as

Differences that currently exist between IFRS and U.S. GAAP with regard to the presentation of information on the income statement include all of the following except

The income statement helps users

What three tests are used to evaluate an operating segment in order to determine if it is a reportable segment?

The income statement reports

How does the statement of cash flows help external users assess the overall health of a company when used in conjunction with the other financial statements?

The following information relates to Zhulu Corporation (in thousands): Required: Compute the amount of dividends paid during the year, using the financial capital maintenance approach.

Below is a list of financial statement components with a corresponding letter code. a. Sales revenue (net) b. Cost of goods sold c. Selling expenses d. General and administrative expenses e. Other revenue and expenses f. Results from discontinued operations g. Extraordinary items h. Prior period adjustments i. Additions to retained earnings (other than h) j. Deductions from retained earnings (other than h) k. Disclosures l. Ending balance sheet Required: Indicate where each component would be reported in the financial statements by inserting the corresponding code letters in the space provided.

The gross profit of Larry Company for 2014 is $300,000, cost of goods manufactured is $400,000, the beginning inventories of goods in process and finished goods are $28,000 and $35,000, respectively, and the ending inventories of goods in process and finished goods are $50,000 and $70,000, respectively. The cost of goods sold of Larry Company for 2014 must have been

In distinguishing between revenues and gains, which of the following statements is false?

The accounting profession has developed three alternatives for matching expenses: association of cause and effect, systematic and rational allocation, and immediate recognition. Discuss the conceptual merits of each alternative and give two examples for each expense matching alternative.

The following items involve the cash flow activities of Prizzie Company for 2014: Required: Prepare the statement of cash flows of Prizzie Company for 2014 using the indirect method.

When an entity reports on a sale of a component of the business

For income reporting purposes, items can appear in any of the following components of the income statement, the statement of retained earnings, and related schedules and footnotes: a. income from continuing operations or supporting schedules b. extraordinary gains or losses c. results from discontinued operations d. statement of comprehensive income e. statement of retained earnings f. disclosure Several items of accounting information are listed below: Required: By placing the letters (a-f) in the spaces provided above, identify where the information would be most appropriately reported. If the information would not appear in any of the above components, place an (X) in the space.

Exhibit 5-2 The following is an income statement from the financial records of Peace, Love and Joy Company for the year ended December 31, 2015: -Refer to Exhibit 5-2. Compute operating margin for Peace, Love, and Joy Company.

To classify an event or transaction as extraordinary it must be unusual in nature and infrequent in occurrence.

Which of the following is not true about interim financial statements?

An operating segment is a component of a company