Term
| The major elements of the income statement are: |
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Definition
| revenues, expenses, gains, and losses. |
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Term
| Irregular transactions such as discontinued operations and extraordinary items should be reported separately in which type of income statement? |
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Definition
| both a single-step and multiple-step income statement report this separately |
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Term
Intraperiod tax allocation is used for which of the following:
A. changes in accounting principle.
B. discontinued operations.
C. extraordinary items.
D. unusual gains/losses. |
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Definition
| Intraperiod tax allocation is applied to all of the options except unusual gains/losses. |
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Term
| Which balance sheet classification would normally require the greatest amount of supplementary disclosure? |
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Definition
| Due to their various covenants and restrictions, long-term liabilities normally require the greatest supplementary disclosure. |
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Term
| Making and collecting loans and disposing of property, plant, and equipment are: |
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Definition
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Term
| The issuance of stock and the payment of dividends are: |
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Definition
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Term
| The current cash debt coverage ratio is often used to assess: |
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Definition
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Term
| The basis for classifying assets as current or non-current is: |
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Definition
| the period of time normally required to convert cash invested in inventory back into cash, or 12 months, whichever is longer |
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Term
| What is the difference between account form and report form balance sheet formats? |
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Definition
1) lists assets on the left and liabilities and stockholders' equity on the right.
2) lists liabilities and stockholders' equity below assets on the same page. |
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Term
| Display in IS of discontinued operations |
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Definition
| Shown in separate section after continuing operations and before extraordinary items, net of tax |
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Term
| Display in IS of extraordinary items |
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Definition
| Shown in separate section before net income, net of tax |
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Term
| Display in IS of unusual gains/losses when not extraordinary |
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Definition
| Shown in separate section before extraordinary items, not net of tax |
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Term
| Display in IS of changes in accounting principal |
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Definition
| Make a retrospective adjustment to prior periods' statements and adjust beginning RE in earliest period presented. Not shown separately on IS. |
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Term
| Display in IS of changes in estimates |
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Definition
| Shown only in affected accounts in current period, no adjustment for prior periods. |
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Term
| Display in IS of correction of errors |
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Definition
| Restate prior year's IS and offset JE with RE in current period. |
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Term
| Usefulness of the income statement |
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Definition
1. For evaluating past performance of the company
2. Provides a basis for predicting future performance
3. Helps assess the risk or uncertainty of achieving future cash flows |
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Term
| Limitations of the income statement |
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Definition
1. Companies omit items they cannot measure reliably
2. Income numbers are affected by the accounting methods used
3. Income measurement involves judgment |
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Term
| Format of single-step income statement |
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Definition
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Term
| Format of multi-step income statement |
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Definition
1. Operating section
2. Nonoperating section
a)other rev/gains
b)other exp/losses
3. Income tax
4. Discontinued operations
5. Extraordinary items
6. Earnings per share |
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Term
| What is intraperiod tax allocation and when is it used? |
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Definition
:when companies allocate tax within a period to the specific items that gave rise to the tax provision. Used for:
-income from continuing operations
-discontinued operations
-extraordinary items |
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Term
| Earnings per share calculation |
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Definition
| (NI-preferred dividends)/Weighted Avg of common shares outstanding |
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Term
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Definition
| all changes in equity during a period except those resulting from investments by/distributions to owners. |
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Term
| Other comprehensive income |
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Definition
| Non-owner changes in equity that bypass the income statement, add to NI to arrive at comprehensive income. |
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Term
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Definition
| Nonrecurring material items that differ significantly from a company's typical business activities. Must be both unusual and infrequent in nature. |
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Term
| Usefulness of the balance sheet |
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Definition
| to analyze liquidity, solvency, and financial flexibility |
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Term
| Limitations of the balance sheet |
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Definition
-most assets and liabilities are reported at historical cost
-use of judgements and estimates for some items
-omits items of financial value that cannot be recorded objectively |
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Term
| How to classify short-term investments on balance sheet: held-to-maturity, trading, available for sale |
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Definition
1. current or noncurrent depending on circumstances
2. current assets
3. current or noncurrent depending on circumstances |
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Term
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Definition
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Term
| Current Asset classification |
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Definition
| if company expects to convert an asset to cash or use it to pay a current liability within 1 year or the operating cycle (whichever is longer) |
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Term
| 5 basic current assets in order of liquidity and there basis of valuation |
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Definition
1. cash/cash equivalents: fair value
2. short-term investments: usually fair value
3. A/R: Estimated amount collectible
4. inventories (first finished, then WIP, last raw materials): lower-of-cost-or-market
5. prepaid expenses: cost |
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Term
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Definition
| the cash effects of transactions that create revenues and expenses, and thus enter into the determination of net income. Includes: net income, CA/CL (excluding investments), amortization, all gains/losses, most revenues/expenses |
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Term
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Definition
| cash flow activities that include (1) purchasing and disposing of investments and productive long-lived assets using cash, and (2) lending money and collecting the loans. Includes: investments and PP&E (#s may include offset for gains/losses in op act) |
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Term
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Definition
| cash flow activities that include (1) obtaining cash from issuing debt and repaying the amounts borrowed, and (2) obtaining cash from stockholders and paying them dividends. Includes: company's own stock, bonds, and dividends but no RE |
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