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Chapter 4: Q12Q (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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Presented below is information related to Viel Company on December 31, 2017, the end of its first year of operations.
Sales revenue $310,000
Cost of goods sold 140,000
Selling and administrative expenses 50,000
Gain on sale of plant assets 30,000
Unrealized gain on non-trading equity securities 10,000
Interest expense 6,000
Loss on discontinued operations 12,000
Allocation to non-controlling interest 40,000
Dividends declared and paid 5,000
Instructions
Compute the following: (a) income from operations, (b) net income, (c) net income attributable to Viel Company controlling shareholders, (d) comprehensive income, and (e) retained earnings balance on December 31, 2017. (Ignore income taxes.)
Why should caution be exercised in the use of the net income figure derived in an income statement? What are the objectives of generally accepted accounting principles in their application to the income statement?
Indicate the section of a multiple-step income statement in which each of the following is shown.
(a) Loss on inventory write-down.
(b) Loss from strike.
(c) Bad debt expense.
(d) Loss on disposal of a discontinued operation.
(e) Gain on sale of machinery.
(f) Interest revenue.
(g) Depreciation expense.
(h) Material write-offs of notes receivable.
Question: Which of the following is not reported in an income statement under IFRS?
(a) Discontinued operations.
(b) Extraordinary items.
(c) Cost of goods sold.
(d) Income tax.
Tim Mattke Company began operations in 2015 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2017, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below.
Year Weighted Average FIFO
2015 \(370,000 \)395,000
2016 390,000 \(430,000
2017 410,000 \)450,000
Instructions
Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2017 income statement.
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