Intermediate accounting 17e by kieso ch04
Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (1.11 MB, 75 trang )
Intermediate Accounting
Seventeenth Edition
Kieso ● Weygandt ● Warfield
Chapter 4
Income Statement and Related Information
This slide deck contains animations. Please disable animations if they cause issues with your device.
Learning Objectives
After studying this chapter, you should be able to:
1.
Understand the uses and limitations of an income statement.
2.
Describe the content and format of the income statement.
3.
Discuss how to report various income items.
4.
Explain the reporting of accounting changes and errors.
5.
Describe related stockholders’ equity statements.
Copyright ©2019 John Wiley & Sons, Inc.
2
Preview of Chapter 4 (1 of 5)
Income Statement and Related Information
Income Statement
•
Usefulness
•
Limitations
•
Quality of earnings
Copyright ©2019 John Wiley & Sons, Inc.
3
Preview of Chapter 4 (2 of 5)
Income Statement and Related Information
Content and Format of the Income Statement
•
Elements
•
Intermediate components
•
Condensed income statements
•
Single-step income statements
Copyright ©2019 John Wiley & Sons, Inc.
4
Preview of Chapter 4 (3 of 5)
Income Statement and Related Information
Reporting Various Income Items
•
Unusual and infrequent gains and losses
•
Discontinued operations
•
Noncontrolling interest in income
•
Earnings per share
•
Summary
Copyright ©2019 John Wiley & Sons, Inc.
5
Preview of Chapter 4 (4 of 5)
Income Statement and Related Information
Accounting Changes and Errors
•
Changes in accounting principle
•
Change in accounting estimates
•
Corrections of errors
•
Summary
Copyright ©2019 John Wiley & Sons, Inc.
6
Preview of Chapter 4 (5 of 5)
Income Statement and Related Information
Related Stockholders’ Equity Statements
•
Retained earnings statement
•
Comprehensive income
•
Statement of stockholders’ equity
•
Balance sheet presentation
Copyright ©2019 John Wiley & Sons, Inc.
7
Learning Objective 1
Identify the Uses and Limitations of an Income Statement
Copyright ©2019 John Wiley & Sons, Inc.
8
Income Statement
Usefulness
LO 1
•
Evaluate past performance of the company
•
Provide a basis for predicting future performance
•
Help assess the risk or uncertainty of achieving future cash flows
Copyright ©2019 John Wiley & Sons, Inc.
9
Income Statement
Limitations
LO 1
•
Companies omit items they cannot measure reliably
•
Income is affected by the accounting methods employed
•
Income measurement involves judgment
Copyright ©2019 John Wiley & Sons, Inc.
10
Income Statement
Quality of Earnings
Companies have incentives to manage income to meet or beat Wall Street expectations, so that
•
market price of stock increases and
•
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.
LO 1
Copyright ©2019 John Wiley & Sons, Inc.
11
Learning Objective 2
Describe the Content and format of the Income Statement
Copyright ©2019 John Wiley & Sons, Inc.
12
Content and Format of the Income Statement
Elements of the Income Statement
Revenues – Inflows or other enhancements of assets of an entity or settlements of its liabilities
during a period from delivering or producing goods, rendering services, or other activities that
constitute the entity’s ongoing major or central operations.
Examples include sales, fees, interest, dividends, and rents.
LO 2
Copyright ©2019 John Wiley & Sons, Inc.
13
Elements of the Income Statement (Expenses)
Expenses – Outflows or other using-up of assets or incurrences of liabilities during a period from
delivering or producing goods, rendering services, or carrying out other activities that constitute the
entity’s ongoing major or central operations.
Examples include cost of goods sold, depreciation, interest, rent, salaries and wages, and taxes.
LO 2
Copyright ©2019 John Wiley & Sons, Inc.
14
Elements of the Income Statement
(Gains and Losses)
Gains – Increases in equity (net assets) from peripheral or incidental transactions of an entity
except those that result from revenues or investments by owners.
Losses – Decreases in equity (net assets) from peripheral or incidental transactions of an entity
except those that result from expenses or distributions to owners.
Gains and losses result from the sale of investments or plant assets, settlement of liabilities, and
write-offs of assets due to impairments or casualty.
LO 2
Copyright ©2019 John Wiley & Sons, Inc.
15
Intermediate Components of the Income Statement
Multiple-Step Income Statement
LO 2
•
Separates operating transactions from nonoperating transactions
•
Matches costs and expenses with related revenues
•
Highlights certain components of income that analysts use assessing financial performance
Copyright ©2019 John Wiley & Sons, Inc.
16
Intermediate Components
Common to present some or all of the following sections and totals within the income statement.
LO 2
1.
Operating section
2.
Nonoperating section
3.
Income tax
4.
Discontinued operations
5.
Noncontrolling interest
6.
Earnings per share
Copyright ©2019 John Wiley & Sons, Inc.
17
Multiple-Step
CABRERA COMPANY
Income Statement
For The Year Ended December 31, 2020
1. Operating Section
2. Nonoperating Section
3. Income tax
LO 2
Condensed Income Statements
LO 2
Copyright ©2019 John Wiley & Sons, Inc.
19
Single-Step Income Statements
Revenues
SingleSingle- Step
Step
Expenses
Net Income
No implication that one type of revenue or
expense item has priority over another.
LO 2
Copyright ©2019 John Wiley & Sons, Inc.
20
P. Bride Company
Income Statement
Income Statement ($000 omitted)
For the Year Ended December 31, 2020
Exercise E4.5: Prepare a income statement from the data
Sales revenue
below using the multiple-step form.
$4,900
Depreciation
3,960
Cost of goods sold
60,570
Rent revenue
17,230
Selling expense
2,690
Sales commissions
7,980
Depreciation
6.480
96,500
Income tax
9.070
Interest expense
1,860
LO 2
60,570
Gross profit
35,930
Selling expense
Administrative expense
Total operating expenses
Income from operations
17,250
8,860
26,010
9,920
Other revenue (expense):
Rent revenue
Delivery expense
Sales revenue
Cost of goods sold
Operating expenses:
Administrative expense
Officers’ salaries
$96,500
Interest expense
17,230
(1,860)
Total other
15,370
Income before tax
25,290
Income tax
Net income
Copyright ©2019 John Wiley & Sons, Inc.
9,070
$16,220
21
Format of the Income Statement
Review Question
A separation of operating and non operating activities of a company exists in
LO 2
a.
both a multiple-step and single-step income statement.
b.
a multiple-step but not a single-step income statement.
c.
a single-step but not a multiple-step income statement.
d.
neither a single-step nor a multiple-step income statement.
Copyright ©2019 John Wiley & Sons, Inc.
22
Format of the Income Statement
Review Question Answer
A separation of operating and non operating activities of a company exists in
LO 2
a.
both a multiple-step and single-step income statement.
b.
a multiple-step but not a single-step income statement.
c.
a single-step but not a multiple-step income statement.
d.
neither a single-step nor a multiple-step income statement.
Copyright ©2019 John Wiley & Sons, Inc.
23
Learning Objective 3
Discuss How to Report Various Income Items
Copyright ©2019 John Wiley & Sons, Inc.
24
Reporting Various Income Items
Companies are required to report unusual and infrequent items as part of net income so users can
better determine the long-run earning power of the company.
These income items fall into four general categories:
LO 3
1.
Unusual gains and losses
2.
Discontinued operations
3.
Noncontrolling interest
4.
Earnings per share
Modified all inclusive concept
Copyright ©2019 John Wiley & Sons, Inc.
25
