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Chapter 4: 12 (page 179)
What is the basis for distinguishing between operating and non-operating items?
Operating items report only the principal operations, and non-operating items reports secondary activities of the company.
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Identify at least two situations in which application of different accounting methods or accounting estimates results in difficulties in comparing companies.
What are the advantages and disadvantages of the single-step income statement?
The following information was taken from the records of Roland Carlson Inc. for the year 2017: income tax applicable to income from continuing operations \(187,000, income tax applicable to loss on discontinued operations \)25,500, and unrealized holding gain on available-for-sale securities (net of tax) \(15,000.
Gain on sale of equipment \)95,000 Cash dividends declared $150,000
Loss on discontinued operations75,000 Retained earnings January1,2017 600,000
Administrative expenses 240,000 Cost of goods sold 850,000
Rent revenue 40,000 Selling expenses 300,000
Loss on write-down of inventory 60,000 Sales revenue 1,900,000
Shares outstanding during 2017 were 100,000.
Instructions
Question: O鈥橫alley Corporation was incorporated and began business on January 1, 2017. It has been successful and now requires a bank loan for additional working capital to finance expansion. The bank has requested an audited income statement for the year 2017. The accountant for O鈥橫alley Corporation provides you with the following income statement which O鈥橫alley plans to submit to the bank.
O鈥橫ALLEY CORPORATION
INCOME STATEMENT
Sales revenue \(850,000
Dividends 32,300
Gain on recovery of insurance proceeds from
earthquake loss 38,500
920,800
Less:
Selling expenses \)101,100
Cost of goods sold 510,000
Advertising expense 13,700
Loss on obsolescence of inventories 34,000
Loss on discontinued operations 48,600
Administrative expense 73,400 780,800
Income before income tax 140,000
Income tax 56,000
Net income $84,000
Instructions
Indicate the deficiencies in the income statement presented above. Assume that the corporation desires a single-step income statement.
Question: What are the two ways that other comprehensive income may be displayed (reported)?
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