...Transactions and events in accounting are considered to be extraordinary items when they are of material effect that are not expected to repeat frequently and would not be seen as repetitive factors in any assessment of the ordinary operating procedures of the business. Extraordinary items are not new to financial statements in fact they have been around since the early to mid-1900. Events and transactions that are considered extraordinary items are constantly changing with everyday occurrences and happenings. Extraordinary items were originally defined in Accounting Principles Board Opinion No. 9 as “events and transactions of material effect that would not be expected to recur frequently and that would not be considered as recurring factors in any evaluation of the ordinary operating processes of the business” (Schroeder). The publication of this opinion No. 9 provided the following examples of events and transactions: “gains or losses from the sale or abandonment of a plant or a significant segment of the business, gains or losses from the sale of an investment not held for resale the write-off of goodwill owing to unusual events during the period, the condemnation or expropriation or properties, and major devaluations of currencies in a foreign country in which the company was operating” (Schroeder).This definition came under review in 1973, and the Accounting Principles Board determined that comparable items of revenues and expenses were not being classified in the same...
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...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...
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...selected | | | | | | | |accounts. | | | | | | | 3. |Single-step income statements; |11, 19, 23, 24 |2, 8 |3, 4, 6, 7, 10, 15, |2, 3, 4, 5 |1, 2, 7 | | |earnings per share. | | |16 | | | | 4. |Multiple-step income statements. |17, 18, 19 |3 |4, 5, 6, 8 |1, 4 | | | 5. |Extraordinary items; accounting |13, 14, 15, 16, 27, |4, 5, 6, 7 |5, 7, 9, 10, 12, 13 |3, 4, 5,...
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...ANSWERS TO QUESTIONS 1. The income statement is important because it provides investors and creditors with information that helps them predict the amount, timing, and uncertainty of future cash flows. It helps investors and creditors predict future cash flows in a number of different ways. First, investors and creditors can use the information on the income statement to evaluate the past performance of the enter-prise. Second, the income statement helps users of the financial statements to determine the risk (level of uncertainty) of income—revenues, expenses, gains, and losses—and highlights the relationship among these various components. It should be emphasized that the income statement is used by parties other than investors and creditors. For example, customers can use the income statement to determine a company’s ability to provide needed goods or services, unions examine earnings closely as a basis for salary discussions, and the government uses the income statements of companies as a basis for formulating tax and economic policy. 2. Information on past transactions can be used to identify important trends that, if continued, provide information about future performance. If a reasonable correlation exists between past and future performance, predictions about future earnings and cash flows can be made. For example, a loan analyst can develop a prediction of future performance by estimating the rate of growth of past income over the past several periods...
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...| | | |Income measurement concepts. | | |12, 14, 16 |1 | | |Calculation of net income. |1, 7 |1, 2, 3 |6, 7, 8, 9 | | | |Single-step income statements; |1, 2, 4, 5, 8, 9 |4, 5, 6, 7, 10, 13,|2, 3, 4, 5, 8, 9, | | | |earnings per share. | |14 |11, 12, 16 | | | |Multiple-step income statements. |3 |5, 6, 7, 8, 9, 10 |1, 4, 6, 8, 15 | | | |Extraordinary items. |5 |6, 8, 9, 10, 13 |1, 3, 5, 6, 8, 11, | | | | | | |13, 15, 16 | | | |Disposal of a segment (discontinued |4, 6 |7, 11, 12, 14 |1, 3, 6, 9, 10, 11 | | | |operations). | | | | | | |Retained earnings statement. |10, 11 |10, 15 |1, 2, 4, 5, 7, 8, 15| | | |Accounting principle changes; changes |11...
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...1. You use a perpetual inventory system and value the inventory using FIFO. Prior to making adjusting year-end entries you valued the inventory at the lower-of-cost or-market. Justify why you valued the inventory at lower-of-cost or-market. FASB ASC CITATION: Adjustments to Lower of Cost or Market 330-10-35-1 A departure from the cost basis of pricing the inventory is required when the utility of the goods is no longer as great as their cost. Where there is evidence that the utility of goods, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, the difference shall be recognized as a loss of the current period. This is generally accomplished by stating such goods at a lower level commonly designated as market. GAAP allows this method for determining an asset's value so that either the original cost or the current replacement cost, whichever is lowest, is used for financial reporting purposes. For example, an inventory item originally purchased for $50 that has a current market value of $30 would appear on an entity’s balance sheet at $30. The use of lower of cost or market is considered a conservative method of valuing assets. Because inventory value may fluctuate over a period of time, due to things like theft, depreciation and because demand for a particular inventory item may not be as high as it once was, there needs to be a system that takes all of...
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...What we’ll cover: 1. Income Statement 2. Format of the Income Statement 3. Reporting Irregular Items 4. Special Reporting Issues 1. Income Statement a. Usefulness • Evaluate past performance • Predicting future performance • Help assess the risk or uncertainty of achieving future cash flows b. Limitations • Companies omit items that cannot be measured reliably • Income is affected by the accounting methods employed • Income measurement involves judgment c. Quality of Earnings • Companies have incentives to manage income to meet or beat Wall Street expectations, so that o market price of stock increases and o value of stock options increase. • Quality of earnings is reduced if earnings management results in information that is less useful for predicting future earnings and cash flows. 2. Format of the Income Statement a. Elements of the Income Statement • Revenues – Inflows of assets or settlements of its liabilities that constitute the entity’s ongoing major or central operations. Examples of Revenue Accounts: o Sales o Fee revenue o Interest revenue o Dividend revenue o Rent revenue • Expenses – Outflows or other using-up of assets or incurrences of liabilities that constitute the entity’s ongoing major or central operations. Examples...
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...INCOME STATEMENTS A multiple-step statement distinguishes between operating and non-operating activities. This distinction provides users with more information about a company’s income performance. On the income statement, accounting standards encourage separate treatment of operating and nonoperating items. Operating items are those relating to the day-to-day management of the enterprise: sales, cost of sales, selling, general and administrative expense, research and development costs etc. Often the net of these items is presented as a subtotal, operating income. Non-operating items include investing and financing activities, which are reported separately from operating income. Non operating items include the interest, dividends and profits on investments made in the securities of other companies; interest expense; etc. Non-operating activities consist of (1) revenues and expenses from auxiliary operations and (2) gains and losses that are unrelated to the company’s operations. The results of non-operating activities are shown in two sections: “Other revenues and gains” and “Other expenses and losses”. For a merchandiser, these sections will typically include the following items. Non-operating Activities Other revenues and gains Interest revenue from notes receivable and marketable securities Dividend revenue from investments in capital stock Rent revenue from subleasing a portion of the store Gain from the sale of property, plant, and...
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...SEC is included in the Codification standards, but just the technical information and not the entire rules, regulations or interpretive releases. Grandfathered content is excluded from the Codification. This would include information about pensions, business combinations and income taxes. The Codification is broken down into five main sections with multiple subsections. These sections are topics, subtopics, section, paragraphs, and subparagraphs. This use of a well organized approach to sorting and combining accounting standards and literature has made the Codification a primary resource for entities and other users alike. Comprehensive income is defined as “the change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.” (multiple, Comprehensive Income Overall 220-10, 2009) Comprehensive income can be a very useful item to investors or users of financial statements. It can let users know how much activity the company has, where it has most of it debt located, or where the company sources of recurring income originates....
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...1 02 Income Determination 18. Basic earnings per share is computed by dividing net income by the weighted average number of common shares of stock outstanding. 19. The change in equity of an entity during a period from transactions and other events from non-owner sources is known as comprehensive income. 20. The basic accounting equation may be expressed as assets = liabilities – owners’ equity. 21. 22. count. 23. uity. Debit means increase. A contra account is an account that is subtracted from a related acRevenues increase owners’ equity and expenses decrease owners’ eq- Income Determination True-False 1. To measure earnings under accrual accounting, revenues are recognized when they are received. 2. Revenues are earned when the seller substantially completes performance required by an agreement. 3. The matching principle requires that expenses be recognized in the same period in which the revenues are recognized that were produced by the expenses. 4. Recognition of revenue under the cash basis occurs when the revenue is received. 5. Under the cash basis, expenses are recognized when the costs expire or assets are used. 6. Cash-basis accounting provides the most useful measure of future operating performance. 7. Accrual accounting recognition rules for revenues and expenses are designed to alleviate mismatching problems that exist under cash basis accounting. 8. According to generally accepted accounting principles, revenue should be recognized at the earliest time...
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.... Waters Department Store had net credit sales of $12,000,000 and cost of goods sold of $9,000,000 for the year. The average inventory for the year amounted to $2,000,000. The average number of days in inventory during the year was (Points: 4) 122 days. 81 days. 61 days. 35 days. 2. Earnings per share is calculated (Points: 4) only for common stock. only for preferred stock. for common and preferred stock. only for treasury stock. 3. The order of presentation of nontypical items that may appear on the income statement is (Points: 4) Extraordinary items, Discontinued operations, Other revenues and expenses. Discontinued operations, Extraordinary items, Other revenues and expenses. Other revenues and expenses, Discontinued operations, Extraordinary items. Other revenues and expenses, Extraordinary items, Discontinued operations. 4. A stockholder is interested in the ability of a firm to (Points: 4) pay consistent dividends. appreciate in share price. survive over a long period. all of these. 5. Waters Department Store had net credit sales of $12,000,000 and cost of goods sold of $9,000,000 for the year. The average inventory for the year amounted to $2,000,000. The average number of days in inventory during the year was (Points: 4) 122 days. 81 days. 61 days. 35 days. 6. Profit...
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...Microsoft Corporation Outline the target market for the business and assess the effectiveness of their marketing strategies for TWO elements of the marketing mix. Microsoft Corporation Table of contents Microsoft corporation overview 3 Introduction 3 Marketing strategies and their effectiveness 4 Conclusion 5 Reference list 6 Appendix Financial Statements For Microsoft Corporation: annual data 7 Microsoft corporation overview Microsoft is a public multinational corporation founded in Albuquerque, New Mexico on April 4th, 1975 by Bill Gates and Paul Allen. Where know the head quarters are in Redmond, Washington, USA with Steve Ballmer (CEO), Brian Kevin Turner (COO), Bill Gates (Chairman), Ray Ozzie (CSA), Craig Mundie (CRSO) and approximately 89,000 employees. Introduction Microsoft became one of the largest and most profitable companies in the world. Its founder, Bill Gates, became one of the wealthiest people in the world. Microsoft products enjoy a market share of more than 90 percent of the operating systems business worldwide. Microsoft has continued to expand and to update its product offerings and in doing so, it continues to spur demand among software buyers for Microsoft's newest and best products. The company has successfully navigated through changes in technology, the rise and fall of competitors, the growth of the Internet, and the globalization of business. In order for this success, Microsoft...
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...OF KODAK AND ITS BANKRUPT I) Introduce For many years, the name Kodak synonymous with camera, but after 131 years, Eastman Kodak prepare to fade in history. What happened? The recent report showed a dismal situation and bankruptcy may be inevitable. So essentially, what mistakes did Kodak acquired ? II) History of Kodak With the slogan "you press the button, we do the rest," George Eastman put the first simple camera into the hands of a world of consumers in 1888. In so doing, he made a cumbersome and complicated process easy to use and accessible to nearly everyone.Since that time, the Eastman Kodak Company has led the way with an abundance of new products and processes to make photography simpler, more useful and more enjoyable. In fact, today's Kodak is known not only for photography, but also for images used in a variety of leisure, commercial, entertainment and scientific applications. Its reach increasingly involves the use of technology to combine images and information--creating the potential to profoundly change how people and businesses communicate.Just as Eastman had a goal to make photography "as convenient as the pencil," Kodak continues to expand the ways images touch people's daily lives. The company ranks as a premier multinational corporation, with a brand recognized in virtually every country around the world. | | Kodak has made it easy to enjoy your pictures. The expression 'You Press the Button, We do the rest' was a common advertising slogan...
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...THE TIMELINESS OF CORPORATE REPORTING: MALAYSIAN EVIDENCE Raja Adzrin Raja Ahmad Khairul Anuar Bin Kamarudin Second Draft: August 2003 Please do not quotes - comments welcome ABSTRACT This paper investigates the determinants of audit delay in Malaysia. The sample comprises 100 companies listed in Kuala Lumpur Stock Exchange during the period 1996-2000. Descriptive statistics indicates the audit delay is more 100 days for the five years under study with a minimum standard deviation of 36 days. Eight hypotheses, relating audit delay to company size, industry classification, sign of income, extraordinary item, audit opinion, auditor, year-end and risk are tested in this study. Result from t-test of differences, chi-square test of independent and ordinary leas square regression (OLS) largely support the alternate hypotheses put forward except for extraordinary items and company size. The primary findings are that audit delay is significantly longer for company that (1) non-financial industry, (2) receive other that unqualified audit opinions, (3) have other than 31 December as financial year end, (4) audited by non bigfive, (5) incurred negative earnings and (6) have higher risk. It is hoped that this study, which is conducted in an economically and culturally different context from all existing studies, can contribute toward the current literature on audit delay. Correspondence Address: Raja Adzrin Raja Ahmad Faculty of Accountancy MARA University of Technology ...
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...Accounting Policies for Reporting Income Accounting Policies for Reporting Income Dana Ferretti ACC 303 Dr. M. Austin Zekeri Intermediate Accounting 1 November 20, 2011 Accounting Policies for Reporting Income GAAP (Generally Accepted Accounting Principles) refers to a common set of standards and procedures that companies follow to present their income and expenses, assets and liabilities of their financial statements. The FASB (Financial Accounting Standards Board) is the major operating organization that establishes and improves the rules of GAAP reporting. GAAP demands companies to disclose their accounting policies in their financial reports. The authoritative literature provided by the FASB, determines the classifications of comprehensive income and net income. Accounting policies are a group of specific policies that consist of principles, rules, and procedures that a company must follow when preparing and reporting its’ financial statements. These policies should include measurement systems, methods, and procedures for presenting disclosures. Accounting policies also include matters such as; depreciation methods, consolidation of accounts, inventory pricing, goodwill, and research and development costs. When these disclosures are presented, it assists the financial users and readers a better interpretation of the company’s financial status. [FASB 235-10-50] The authoritative literature of the FASB Accounting Standards...
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