• Home
  • Textbooks
  • Financial Reporting and Analysis: Using Financial Accounting Information
  • Income Statement

Financial Reporting and Analysis: Using Financial Accounting Information

Charles H. Gibson

Chapter 4

Income Statement - all with Video Answers

Educators

Chapter Questions

Problem 1

What are extraordinary items? How are they shown on the income statement? Why are they shown in that manner?

Check back soon!

Problem 2

Which of the following would be classified as extraordinary?
a. Selling expense
b. Interest expense
c. Gain on the sale of marketable securities
d. Loss from flood
e. Income tax expense
f. Loss from prohibition of red dye
g. Loss from the write-down of inventory

Check back soon!
05:02

Problem 3

Give three examples of unusual or infrequent items that are disclosed separately. Why are they shown separately? Are they presented before or after tax? Why or why not?

Mihir Nayar
Mihir Nayar
Numerade Educator

Problem 4

Why is the equity in earnings of nonconsolidated subsidiaries sometimes a problem in profitability analysis? Discuss with respect to income versus cash flow.

Check back soon!

Problem 5

A health food distributor selling wholesale dairy products and vitamins decides to discontinue the division that sells vitamins. How should this discontinuance be classified on the income statement?

Check back soon!

Problem 6

Why are unusual or infrequent items disclosed before tax?

Check back soon!

Problem 7

In the future, we should expect few presentations of a "cumulative effect of change in accounting principle." Comment:

Check back soon!

Problem 8

How does the declaration of a cash dividend affect the financial statements? How does the payment of a cash dividend affect the financial statements?

Check back soon!

Problem 9

What is the difference in the impact on financial statements of a stock dividend versus a stock split?

Check back soon!

Problem 10

Why is net income-noncontrolling interest deducted before arriving at net income?

Check back soon!

Problem 11

Explain the relationship between the income statement and the reconciliation of retained earnings.

Check back soon!
04:02

Problem 12

List the three types of appropriated retained earnings accounts. Which of these types is most likely not a detriment to the payment of a dividend? Explain.

Puneet Prajapati
Puneet Prajapati
Numerade Educator

Problem 13

A balance sheet represents a specific date, such as "December 31," while an income statement covers a period of time, such as "For the Year Ended December 31, 2010." Why does this difference exist?

Check back soon!
02:44

Problem 14

Describe the following items:
a. Net income-noncontrolling interest
b. Equity in earnings of nonconsolidated subsidiaries

Puneet Prajapati
Puneet Prajapati
Numerade Educator

Problem 15

An income statement is a summary of revenues and expenses and gains and losses, ending with net income for a specific period of time. Indicate the two traditional formats for presenting the income statement. Which of these formats is preferable for analysis? Why?

Check back soon!
06:55

Problem 16

Melcher Company reported earnings per share in 2010 and 2009 of $\$ 2.00$ and $\$ 1.60$, respectively. In 2011. there was a 2 -for-l stock splic, and the earnings per share for 2011 were reported to be $\$ 1.40$. Give a three-year presentation of earnings per share (2009-2011).

Chris Trentman
Chris Trentman
Numerade Educator
01:47

Problem 17

Comment on your ability to determine a firm's capacity to make distributions to stockholders, using published financial statements.

Jennifer Stoner
Jennifer Stoner
Numerade Educator

Problem 18

Management does not usually like to tie comprehensive income closely with the income statement. Comment.

Check back soon!

Problem 19

Review the consolidated income statement, expenses analyzed by function (Exhibit 4-12). Comment on similarities and differences to the U.S. GAAP income statement.

Check back soon!

Problem 20

Review the consolidated income statement, expenses analyzed by nature (Exhibit 4-13). Comment on similarities and differences to the U.S. GAAP income statement.

Check back soon!

Problem 21

U.S. GAAP had a new standard, effective for fiscal years beginning on or after December 15,2008 , relating to the presentation of noncontrolling interest. Considering this standard, present the profit for the year presented in Exhibit 4-12, IFRS model consolidated income statement.

Check back soon!