Exam 5: Statements of Net Income and Comprehensive Net Income

What is a noncontrolling interest and what does it represent in the income statement?

If a company writes down the net assets of a discontinued operation from original carrying value to a remeasurement of fair value in one year, and then in the next year the fair value changes ________.

Based on the following income statement, prepare a common-size income statement based on sales. Round to two decimal places. Sales $200,000 Cost of goods sold 147,800 Gross profit 52,200 Selling and administrative expenses 20,480 Operating income $31,720 Interest expense 7,320 Income before tax $24,400 Income tax expense 7,320 Net Income $17,080

IFRS requires companies to report specific items on the income statement including finance costs.

Compare and contrast two earnings management techniques.

Identify and describe the two primary factors that impact earnings quality.

In what ways is management motivated to engage in earnings management?

The income tax provision includes all income taxes from every source and every cause such as discontinued operations.

Under IFRS, the statement of stockholders' equity summarizes changes of exactly three elements: contributed capital, retained earnings, and other comprehensive income.

Comprehensive income may be reported in the financial statements in either of two formats.

IFRS requires, but U.S. GAAP does not require, a statement of stockholders' equity.

Gains and losses from discontinued operations are shown on the income statement after the provision for income taxes is presented.

All of the following are true about the use of common-size financial statements except:

Under U.S. GAAP, identify the six key performance measure subtotals on the statement of net income.

Biglo Chemical Company reported the following in the statement of comprehensive income for the year ended December 31: Income from continuing operations before tax \ 600,000 Income tax expense (140,000) Net income 460,000 Other comprehensive income 110,000 Comprehensive income 240,000 During the year, the company paid $60,000 in dividends and purchased treasury stock with a par value of $10,000 at a cost of $70,000. If the balance of Retained Earnings at the beginning of the year was $380,000, what is the balance of Retained Earnings at the end of the year?

Other comprehensive income is comprised of elements explicitly excluded from net income.

Truko, Inc. provided the following partial trial balance for the current year. Prepare a multi-step income statement for the year ended December 31. Truko is subject to a 40% income tax rate. Truko, Inc. Partial Trial Balance (Selected Accounts) For the year ended December 31 Accounts Debit Credit Dividends \ 2,460 Sales \ 225,400 Dividend Income 3,830 Interest Income 1,450 Gain on Disposal of Plant Assets 14,810 Unrealized Gain on Trading Investments 7,270 Cost of Goods Sold 90,100 Office Supplies Expense - General Expense 4,500 Sales Salaries Expense 8,390 Selling Expenses 11,210 Accounting and Legal Fees - General Expense 2,400 Advertising Expense 6,660 Office Salaries Expense-Admin. Expense 21,480 Depreciation Expense-General Expense 18,600 Interest Expense 2,570 Loss on Asset Impairment 1,840

Which of the following is considered to be a limitation of income statements?

The "cookie jar reserves" earnings management technique involves increasing earnings in the current period so as to increase managers' compensation.

Other comprehensive income includes gains and losses from all foreign currency translations.