The Income Statement and the Statement of Stockholders Equity .


39 views
Uploaded on:
Description
The Income Statement and the Statement of Stockholders’ Equity. Chapter 11. Learning Objective 1. Analyze a complex income statement. Allied Electronics Corporation Income Statement Year Ended December 31, 20x5. Sales revenue $500,000 Cost of goods sold –240,000
Transcripts
Slide 1

The Income Statement and the Statement of Stockholders\' Equity Chapter 11

Slide 2

Learning Objective 1 Analyze a mind boggling salary articulation.

Slide 3

Allied Electronics Corporation Income Statement Year Ended December 31, 20x5 Sales revenue $500,000 Cost of merchandise sold –240,000 Gross margin $260,000 Operating expenses 181,000 Operating income $ 79,000 Income Statement - Continuing Operations

Slide 4

Income Statement - Continuing Operations Operating income $79,000 Other picks up (misfortunes): Loss on rebuilding operations ( 8,000) Gain marked down of machinery 19,000 Income from proceeding with operations before salary tax $90,000 Income assess expense 36,000 Income from proceeding with operations $54,000

Slide 5

Income Statement - Special Items Discontinued operations: $35,000, less wage duty of $14,000 21,000 Income before remarkable things and combined impact of progress in deterioration method $75,000 Extraordinary surge misfortune, $20,000, less pay impose reserve funds of $8,000 (12,000) Cumulative impact of progress in depreciation strategy, $10,000, less wage assessment of $4,000 6,000 Net income $69,000

Slide 6

Income Statement - Earnings per Share Earnings per share of normal stock (20,000 shares exceptional): Income from consistent operations $2.70 Income from suspended operations 1.05 Income before unprecedented thing and total impact of progress in devaluation method $3.75 Extraordinary loss (0.60) Cumulative impact of progress in devaluation method 0.30 Net income $3.45

Slide 7

Continuing Operations The organization rebuilt operations at lost $8,000. Report as "Other" thing – some portion of proceeding with operations, however falls outside of primary business attempt

Slide 8

Continuing Operations Investment capitalization rate – used to assess the estimation of an interest in the capital supply of another organization

Slide 9

Continuing Operations Assume a loan fee (i) of 12% to valuate Allied. Assessed estimation of Allied Electronics basic stock = Estimated yearly pay later on ÷ Investment capitalization rate = $54,000 ÷ 0.12 = $450,000

Slide 10

Continuing Operations Current market estimation of the organization = # of shares of normal stock remarkable × Current market cost per share = × $513,000 $4.75 108,000 ©2006 Prentice Hall Business Publishing Financial Accounting, 6/e Harrison/Horngren

Slide 11

Continuing Operations: Investment Decision Rule: Estimated esteem > showcase esteem? Purchase Estimated esteem = advertise esteem? HOLD Estimated esteem < advertise esteem? Offer In the Allied Electronics case: Estimated estimation of the organization $450,000 < Current market esteem $513,000 Sell the stock

Slide 12

= Estimated yearly profit per share ÷ Investment capitalization rate Continuing Operations: Investment Decision Estimated estimation of one share of basic stock

Slide 13

Irregular Items Discontinued operations Extraordinary things Cumulative impact of an adjustment in bookkeeping rule

Slide 14

Discontinued Operations Segment – identifiable division of an organization

Slide 15

Extraordinary Items Unusual for the organization and occasional Losses because of regular catastrophes Expropriations Exception Material increases/misfortunes from extinguishment of obligation (to be accounted for as phenomenal thing)

Slide 16

Cumulative Effect of a Change in Accounting Principle From twofold declining-adjust (DBB) to straight-line devaluation From first-in, first-out (FIFO) to weighted-normal cost for stock Report in a unique area of the wage proclamation after remarkable things

Slide 17

Earnings per Share of Common Stock (Net Income – Preferred Dividends) ÷ Average Number of Common Shares Outstanding = Earnings per Share

Slide 18

Earnings per Share of Common Stock Required to be unveiled on the wage explanation for every single real segment Earnings per share is liable to weakening ( lessening), if issue of extra shares is conceivable later on

Slide 19

Comprehensive Income Change in all out stockholders\' value from all sources other than from proprietors of the business Includes net pay in addition to undiscovered increases (misfortunes) on accessible available to be purchased speculations and remote money interpretation alterations

Slide 20

Statement of Comprehensive Income Net income $69,000 Other extensive wage: Unrealized pick up on investment $ 6,500 Less pay charge (40%) 2,600 3,900 Foreign-cash interpretation modification (loss) $(9,000) Less pay impose (40%) 3,600 ( 5,400) Comprehensive income $67,500 ©2006 Prentice Hall Business Publishing Financial Accounting, 6/e Harrison/Horngren

Slide 21

Learning Objective 2 Account for an enterprise\'s pay assess.

Slide 22

Accounting for Corporate Income Taxes Income assess cost – cost on pay proclamation Income charge payable – risk on monetary record

Slide 23

Income impose cost = Income before wage impose (from the pay articulation ) × Income impose rate Income assess payable = Taxable salary (from the wage government form documented with the IRS) × Income impose rate Accounting for Corporate Income Taxes when all is said in done, wage charge cost and pay impose payable can be processed as takes after:

Slide 24

Accounting for Corporate Income Taxes Suppose for 20x5, Nike, Inc., has pretax bookkeeping wage of $900 million on the pay explanation. Assessable salary is $800 million on the organization\'s pay expense form. The expense rate is 40%.

Slide 25

Accounting for Corporate Income Taxes Dec 31 Income Tax Expense ($900 x .40) 360 Income Tax Payable ($800 x .40) 320 Deferred Tax Liability 40 Recorded salary impose for the year ©2006 Prentice Hall Business Publishing Financial Accounting, 6/e Harrison/Horngren

Slide 26

Accounting for Corporate Income Taxes Income articulation Income before pay tax $900 Income charge expense 360 Net income $540 Balance sheet Current Liabilities: Income assess payable $320 Long-term liabilities: Deferred impose liability 40 * Total $360 * Assumes starting duty obligation was zero.

Slide 27

Prior-Period Adjustments C orrections to the starting parity of Retained Earnings for blunders of a prior period

Slide 28

CNN Corporation Statement of Retained Earnings Year Ended December 31, 2005 Retained Earnings, Dec. 31, 2004 (original) $390,000 Prior-period alteration – charge to right mistake in recording wage impose cost of 2004 ( 10,000) Retained income, Dec. 31, 2004, adjusted $380,000 Net wage for 2005 114,000 Total $494,000 Deduct: Dividends for 2005 ( 41,000) Retained profit adjust, Dec. 31, 2005 $453,000 Reporting a Prior-Period Adjustment ©2006 Prentice Hall Business Publishing Financial Accounting, 6/e Harrison/Horngren

Slide 29

Restrictions on Retained Earnings Dividends and buys of treasury stock require installments by the enterprise to its stockholders Creditors may confine a partnership\'s profit installments and treasury stock buys Companies report any held income limitations in notes to the monetary proclamations

Slide 30

Learning Objective 3 Analyze an announcement of stockholders\' value.

Slide 31

Analyzing the Statement of Stockholder\'s Equity ©2006 Prentice Hall Business Publishing Financial Accounting, 6/e Harrison/Horngren

Slide 32

Analyzing the Statement of Stockholder\'s Equity

Slide 33

Learning Objective 4 Understand chiefs\' and evaluators\' obligations regarding the money related articulations.

Slide 34

Responsibility for the Financial Statements Management issues an announcement of responsibility with money related articulations proclaims duty regarding monetary explanations and states that they fit in with GAAP

Slide 35

Auditor Report Typically contains three sections: Identifies the reviewed budgetary proclamations Describes how the review was performed States the examiner\'s feeling - monetary articulations adjust to GAAP and individuals can depend on them for basic leadership

Slide 36

Auditor Report Unqualified (Clean) Qualified Adverse Disclaimer

Slide 37

End of Chapter 11

Recommended
View more...