ADMS 3585 Chapter Notes - Chapter 4: Net Income, Income Statement, Current Asset

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blushelk242

19 Oct 2012

School

York University

Department

Administrative Studies

Course

ADMS 3585

Professor

Ping Peng

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Document Summary

Presenting expenses: nature versus function: under ifrs, analysis of expenses must be presented based on either, nature of expenses, or, function of expenses. If expenses are presented by function, nature of expenses must also be disclosed: no similar requirement under private entity gaap, choice should result in information that is more reliable and relevant. Revenues: net sales, other revenues (e. g. dividend, rental) Selling expenses: cost of goods sold, administrative expenses. Income tax expense: presents only two groupings before income before discontinued operations, revenues (includes gains, expenses (includes losses) Income tax expense often reported separate from expenses as the last line item in determining net income: advantages, simplicity, eliminates classification problems for revenues and expenses, disadvantage, operating and non-operating activities reported together lower relevance. Atypical and material, subject to mgr intention. Gains and losses that do not qualify as an extraordinary item but are material in amount: one of infrequent or atypical and does depend on management decisions.

Related Questions

Vertical Analysis. Refer to the information of Cuneo Company above. 1- Prepare a common-size income statement for year 1, 2 and 3 by expressing each line item as a percentage of sale revenue. Cuneo Company Income Statements For years 1, 2, and 3 Year 1: Sales: $1,000,000 Less: Cost of goods sold: (700,000) Gross margin: $300,000 Less operating expenses: Selling expenses: (150,000) Administrative expenses: (50,000) Operating income: $100,000 Less: Interest expenses: (25,000) Income before taxes: $75,000 Year 2: Sales:$1,200,000 Less: Cost of goods sold: (700,000) Gross margin: $500,000 Less operating expenses: Selling expenses: (220,000) Administrative expenses:(60,000) Operating income:220,000 Less: Interest expenses: (25,000) Income before taxes: $195,000 Year 3: Sales: $1,700,000 Less: Cost of goods sold: (1,000,000) Gross margin: $700,000 Less operating expenses: Selling expenses: (250,000) Administrative expenses:(120,000) Operating income: $330,000 Less: Interest expenses: (25,000) Income before taxes: $305,000

carminedog139

Interest expense would be classified on a multiple-step income statement under the heading

Other revenues and gains.
Operating expenses.
Other expenses and losses.
Cost of goods sold.

P3â20 Common-size statement analysis A common-size income statement for Creek Enterprisesâ
2014 operations follows. Using the firmâs 2015 income statement presented in
Problem 3â18, develop the 2015 common-size income statement and compare it with
the 2014 statement. Which areas require further analysis and investigation?

Creek Enterprises Common-Size Income Statement
for the Year Ended December 31, 2014

Sales revenue ($35,000,000) 100.0%
Less: Cost of goods sold 65.9
Gross profits 34.1%
Less: Operating expenses
Selling expense 12.7%
General and administrative expenses 6.3
Lease expense 0.6
Depreciation expense 3.6
Total operating expense 23.2
Operating profits 10.9%
Less: Interest expense 1.5
Net profits before taxes 9.4%
Less: Taxes (rate 5 40%) 3.8
Net profits after taxes 5.6%
Less: Preferred stock dividends 0.1
Earnings available for common stockholders 5.5%


Creek Enterprises
Common-Size Income Statement
For the Years Ended December 31, 2014 and 2015

	2015	2014
Sales revenue ($30,000,000)
Less: Cost of goods sold
Gross profits
Less: Operating expenses
Selling expense
General and administrative expenses
Lease expense
Depreciation expense
Total operating expense
Operating profits
Less: Interest expense
Net profits before taxes
Less: Taxes (rate = 40%)
Net profits after taxes

ADMS 3585 Chapter Notes - Chapter 4: Net Income, Income Statement, Current Asset

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