"Income Statement" Essays and Research Papers

Income Statement

the bottom line of their income statement and is a measure of the firm’s income over a given period of time. The cash flow of a firm shows how a firm has used the cash it earned during a set of time. There are two reasons that the income statement does not show the amount of cash earned. One, there are non-cash entries on the income statement and second, there are certain uses such as a purchase of a building that are not reported on the income statement. The statement of cash flows utilizes the...

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Balance Sheet and Income Statement Commentary

Balance Sheet and Income Statement Commentary Belinda Greer BSA/500 March 24, 2012 Murali Ramachandran Balance Sheet and Income Statement Commentary Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look...

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Balance Sheet and Income Statement Analysis

5 – BALANCE SHEET AND INCOME STATEMENT -Identify the different financial statements (BS*, IS, Statement of Stockholders’ Equity, and related notes) -Identify the different components of the BS (Assets: current and long term; Liabilities: current and long term; stockholders’ equity: preferred stock, common stock, PIC, treasury stock) -Identify the different component of the IS (Gross profit, earnings before interest and taxes, interest expense, income tax expense, income from continuing operations...

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Income Statements

The Income Statement This indicates financial performance over a period of time. It is usually done at the end of a financial year (30th June), but an income statement can be made up at other times, e.g., if a business wishes to apply for a loan, the bank may ask for a more recent income statement. The other names for this kind of statement are Revenue Statement and Profit and Loss Statement. Income Statement for Ima Mess, year ended 30.6.12 | ...

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financial statement

Analysis of Financial Statements After reading this chapter, students should be able to: Explain why ratio analysis is usually the first step in the analysis of a company’s financial statements. List the five groups of ratios, specify which ratios belong in each group, and explain what information each group gives us about the firm’s financial position. State what trend analysis is, and why it is important. Describe how the Du Pont chart is used, and how it may be modified to include...

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Introduction to Financial Statement

own words. Sarbanes-Oxley Act (SOX): This was a regulation passed by the government to prevent immoral corporate behavior. Balance sheet: A balance sheet is a financial statement that shows the assets, liabilities and stockholder’s equity. Income Statement: An income statement is a financial report that shows the net income or net loss by reporting the revenues and expenses. External user: External users of accounting information are investors or bankers that need accounting reports see whether...

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Elements of Financial Statements

Financial Statements are described as the language of business. These statements tell the condition and performance of a business historically, currently and prospectively. The main objective is to provide information about financial position, financial performance and cash flows of an entity used in making economic decisions. ELEMENTS OF FINANCIAL STATEMENTS Financial Statements portray the financial effects of transactions and other events by grouping them into broad classes according to their...

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Pro forma statement analysis

Pro forma statement analysis The outputs from the financial planning model are projected financial statements called pro forma financial statements. In finance and accounting, the term pro forma means forecasted or projected (Parrino, 2012). These statements are prepared on the basis of the inputs and assumptions that are fed into the financial model. This paper presents an analysis of the pro forma income statement and pro forma balance sheet of a fictitious company called XYZ Company inc. Appendix...

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Saks Fifth Avenue vs. Neiman Marcus - A Detailed Company Analysis Using Balance Sheets and Income Statements

writing to analyse the company's current balance sheet and income statement. Particularly, I will critique on the company's results, compare it to past years, compare it to competitors, and make recommendations on how to improve its financial position. Neiman Marcus department stores offer luxurious and high-quality men's and women's apparel and accessories. The Neiman Marcus Group operates 35 stores in nearly 20 states. The 2004 net income was an impressive $204 million and revenue was $3.5 billion...

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Overview of Financial Statements Analysis

1: Pierce Company reported net income of $200,000 for the current year. Depreciation recorded on buildings and equipment amounted to $80,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $20,000 $15,000 Accounts receivable 24,000 32,000 Inventories 50,000 65,000 Prepaid expenses 7,500 5,000 Accounts payable 12,000 18,000 Income taxes payable 1,600 1,200 Instructions ...

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Income Smoothing Methods

companies are to report positive results and shall not present any 'surprises'. Managers therefore often turn to their accounting departments for help, whose job it then is to improve the bottom line by changing the information shown in financial statements and hence improve investor confidence. This process is also called earnings management. Earnings management may be utilised in several different ways – facilitated by the flexibility of the US GAAP and the IFRS. These can be stated and interpreted...

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Conceptual Framework and Financial Statements

CONCEPTUAL FRAMEWORK AND FINANCIAL STATEMENTS TEN-MINUTE QUIZ Circle the letter of the best response. 1. The Accounting Equation is: A. Assets + Liabilities = Owner’s Equity. B. Assets = Liabilities –Owner’s Equity. C. Assets = Liabilities + Owner’s Equity. D. Assets = Liabilities x Owner’s Equity. 2. Which item is not an asset? A. Cash B. Accounts Payable C. Accounts Receivable D. Supplies 3. Given that total liabilities decreased...

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Income Statement and Statement of Cash Flows

How are the income statement and statement of cash flows used to make business decisions? The income statement reflects the company's financial performance by showing how much money was generated (revenue), how much was spent (expenses), and the difference (profit) between the two over a period of time. It is divided into the operating and non-operating sections. It can also tell how much money shareholders would receive if the company were to distribute all of its net earnings. The cash flow...

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Generally Accepted Accounting Principles and Net Income

equity can increase through:  Owner contributions and/or  Net income Owner's equity can decrease through:  Owner drawings (10 - 15 min.) E 1-24 Req. 1 Net income for American Express Services (AES) is $7,000,000,000. Revenues – Expenses = Net Income $21,000,000,000 - $14,000,000,000 = $7,000,000,000 Req. 2 The owner’s equity increased during the year by* $7,000...

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Financial Statement Analysis - Accounting

Financial Statement Analysis Financial Statement Analysis The financial health of an organization can be evaluated using ratio analysis. A comprehensive review of Landry’s Restaurants, Inc using their 2003 Annual Report will use seven different ratios calculated from Landry's financial statements. The ratio analysis will test the profitability, liquidity, and solvency of the company. Liquidity ratios measures the "short-term ability of the enterprise to pay its maturing obligations...

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Cash Flow Statement

Method is used eg. Take 25% of income Investment Income = Less % of Dividends Paid + % of Net Income + Impairment Calculation + Amortization of Excess Payment of FV of Assets Note: Do not record Share Price Increase or Decrease 2013-24, 2013M1-31, 2008-82 Co. Q’s share of the excess of fair value over book value of the asset should be amortized over the life of the asset and charged against investment income in Co. Q’s income statement Cost or Equity Method...

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Tata Motors Financial Statement 2012

Income statement | FY 2011-2012 | FY 2010-2011 (in rscrores) | 1.Income | | | Revenue from operations | 59,220.94 | 51,183.95 | Less ; excise duty | 4914.38 | 4095.51 | | 54,306.56 | 47,088.44 | Other income | 574.08 | 422.97 | | | | 2.Expenses | | | Cost of material consumed | 33,894.82 | 27,058.47 | Purchase of products for sale | 6,433.95 | 7,363.13 | Changes in inventories of finished goods, work-in-progress and products for sale | (623.84)...

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Assignment - Preparing Entries and Statements

Assignment: Preparing Entries and Statements ACC225/Financial Accounting Assignment: Preparing Entries and Statements QS 4-5A The following unadjusted trial balance is for Adams Construction Co. as of the end of its 2005 fiscal year. The June 30, 2004, credit balance of the owner’s capital account was $52,660, and the owner invested $25,000 cash in the company during the 2005 fiscal year. [pic] Prepare a 10-column work sheet for fiscal year 2005, starting with the unadjusted...

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Component of Financial Statement

16th January 2012 34 Mansion road Granchestor meadows Oxford Ox1 6ds Dear Mr Han , I am writing this letter to explain to you the component of your financial statement, this includes the Balance sheet at 31st of March 2011 and the profit and loss account for the year ended in 31st of March 2011 , hope you have a b etter understanding after reading my letter. The Profit and Loss account shows whether your business has made profit or loss , over your financial year. This also...

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Working with Financial Statements

Working with Financial Statements Accounting is the heart and soul of executing a successful business. Accounting is used to provide record for all items that are paid and received for a business over any period of time. Within the purpose of accounting lies the need to provide continuity and sustainability within a business, without it a business will not thrive. The information obtained is kept on record, in order to give insight to upper management on data concerning the daily revenue and expenses...

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Financial Statement Analysis of Ford and Microsoft Company

Microsoft (MSFT). You have 90 minutes to complete the following tasks: 1. Download the annual income statements, balance sheets, and cash flow statements for the last four fiscal years from MarketWatch (www.marketwatch.com). Enter each company’s stock symbol and then go to “financials.” Export the statements to Excel by right-clicking while the cursor is inside each statement. 2. Find historical stock prices for each firm from Yahoo! Finance (http://finance...

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“Compare the Relative Advantages and Limitations of Financial Statements Prepared on a Cash Basis with Those Prepared on an Accrual Basis”

“Compare the relative advantages and limitations of financial statements prepared on a cash basis with those prepared on an accrual basis” To compare the advantages and limitations of different financial statements begins with first understanding what financial statements are and what different purposes they can be used for, as well as the differentiation between cash and accrual accounting. The cash and accrual methods of accounting are the two principle ways of keeping track of businesses takings...

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The Use of Profit and Loss Statements

TITLE: The Use of Profit and Loss Statements INTRODUCTION: This report will discuss the usage of a profit and loss statement in accounting as well as explaining why expenses are separated into specific categories in these reports. The different types of profits measured in this statement will also be explained. ROLE AND PUPOSE OF A PROFIT AND LOSS STATEMENT: 1. Role of a Profit and Loss Statement A profit and loss statement is a report prepared for presentation to interested parties showing...

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Note to Financial Statements

AUDITOR’S REPORT [pic] [pic] NOTES TO FINANCIAL STATEMENTS 37.3 Fair values of financial assets and liabilities Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arms length transaction. Notes to the Financial Statements for the year ended June 30, 2008 (b) Credit risk Credit risk represents the risk of a loss if the counter parties fail...

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Financial Statement Fraud: Lessons from the Zzzz Best Case

ACC 461 Auditing Financial Statement Fraud: Lessons from the ZZZZ Best Case The video “Cooking the Books” discussed the ZZZZ Best case of fraud, it tells how and why fraud was perpetrated by Barry Minkow and why it was undetected for so long. According to the video, ZZZZ Best was founded by Barry Minkow in 1982; when he was sixteen years old, it started as a carpet cleaning company. But, due to high competition in the industry, low entry barriers, and bad internal control, this young entrepreneur...

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Analyzing Financial Statements

Analyzing Financial Statements December 16, 2012 Regina Campbell Calculate the following: Current ratio, long-term solvency ratio, contribution ratio, programs and expense ratio, general and management and expense ratio, fund-raising and expense ratio, and revenue and expense ratio for the years 2003 and 2004. 2003 2004 Current Ratio: .87 .90 Long Term Solvency Ratio: ...

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Income Statement

TRUE-FALSE STATEMENTS 8. Closing entries are not needed if the business plans to continue operating in the future and issue financial statements each year. 9. The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the...

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Financial Statement Analysis of Amazon.Com

Financial Statement Analysis of Amazon.com, Inc. Introduction The purpose of this essay is to perform financial statement analysis on Amazon.com, Inc. (NASDAQ: AMZN ). We start with an introduction of Amazon and its industry. We then evaluate the company’s financial position, liquidity, operating capability and financial flexibility using different ratios. To evaluate the financial performance of Amazon.com, Inc we disclose recurring NICO and do full ROE disaggregation. Amazon.com’s stock price...

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VERTICAL ANALYSIS Vertical Analysis Definition A method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a proportion of the total account. The main advantage of vertical analysis is that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy to see relative annual changes within one business. ...

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assembly plant to accommodate the new workstations, then its annual depreciation costs will rise by $1,750,000 $700,000 $350,000 $17,500,000 None of these Income Statement Data Quarter 1 (in 000s) Sales Revenues $50,000 Operating Profit 14,400 Net Income $ 9,555 Balance Sheet Data Total Current Assets $70,000 Total Assets 139,000 Total Current Liabilities 26,000 L-T Debt (draw against credit line) 23,000 Total...

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Absorption and Variable Costing

absorption and variable costing. 2. Prepare an income statement under absorption costing. 3. Prepare an income statement under variable costing. 4. Reconcile reported income under absorption and variable costing. 5. Explain the implications of absorption and variable costing for cost-volume-profit analysis. 6. Evaluate absorption and variable costing. 7. Explain the rationale behind throughput costing. 8. Prepare an income statement under throughput costing. Chapter...

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MGM 5500: Questions and Answers

MGM 5500 Assignment #6 A. What is the difference between a contribution income statement and a traditional income statement? Contribution income statement is an income statement that classifies cost by behavior (fixed cost and variable cost). Traditional income statement is sometimes called the functional income statement. It is an income statement prepared in the multiple-step or single –step income statement format which conforms to Generally Accepted Accounting Principles (GAAP) and can...

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Chapter 2 Solution-Classifying Accounting Items

E2.5. Classifying Accounting Items a. Current asset b. Net revenue in the income statement: a deduction from revenue c. Net accounts receivable, a current asset: a deduction from gross receivables d. An expense in the income statement. But R&D is usually not a loss to shareholders; it is an investment in an asset. e. An expense in the income statement, part of operating income (and rarely an extraordinary item). If the restructuring charge is estimated, a liability is also...

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Accounting Cheat Sheet

Consolidated Statement of Income Operating Revenues Revenue from services Sales revenue Less: Credit Card Discount Less: Sales Discount Less: Sales Returns & Allowances Total revenues Operating Expenses Cost of goods sold Salaries expense Rent expense Advertising expense General and administrative expenses Depreciation expense Other operating expenses Total expenses Operating Income Other Items Investment income Interest expense Loss on PPE sold Income before Income Taxes Income tax...

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Understanding Financial Reports

Introduction In module 2 case study I am to do the following understanding financial reports and continue to review the financial statements of Merck and Novartis to learn additional information. The emphasis of this Case is to review the income statement, balance sheet and computation of ratios. Review the financial statements for the companies and answer the following questions for the last reporting year: Balance Sheet • What components of stockholders' equity does each of the companies disclose...

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Sun Microsystems Report

market. However, no earnings were cited and the information of income statement and additional analysis of other factors, consolidated balance sheet were available at the summaries. This report from Sun Microsystems to the shareholders will present all the information, in regard to the annual percentage change in net income per common share-diluted for 1998-1999, 1999-2000, and 2000-2001. In addition, this report will compute the net income/revenue (sales) for those years, and will explain the major...

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Grear Rafting Analysis

been in operation for one year, and according to the income statement she has provided, she is losing money. Because of her dream to maintain this rafting business, she has come to us for help to get her out of the red. In order to do this, we need to explain variable and fixed costs, period and product costs, and rewrite Grear Rafting’s income statement. Grear Rafting’s income statements is provided below. Grear Rafting Company Income Statement For the Year Ended December 31, 2008 ...

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ACC 561 Assignment Wiley Plus Week 2

The comparative balance sheets of Nike, Inc. are presented here. Complete the horizontal analysis of the balance sheet data for Nike using 2006 as a base. E13-6 Here are the comparative income statements of Winfrey Corporation. Complete the horizontal analysis of the income statement data for Winfrey Corporation using 2009 as a base E13-9 Armada Company has these comparative balance sheet data: Compute the following ratios at December 31, 2010. Business - Accounting...

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Report on Financial Statement Fraud Scheme Case Study: the Importance of Timing

Report on Financial Statement Fraud Scheme Case Study: The Importance of Timing ACC/556 Professor University of Phoenix December 19, 2011 Memo  To: The Management  From: Forensic Auditor  Date: 12/19/2011  Subject: Case Study on the Importance of Timing and Financial Statement Fraud Scheme As our company is in process of conducting investigation to detect any financial statement fraud or abuse, I have come across the case where expenses were recorded in the financial...

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Acc 290

financial statement is used to determine cash generated from operations? A. Income statement B. Statement of operations C. Statement of cash flows D. Retained earnings statement   2. In terms of sequence, in what order must the four basic financial statements be prepared? A. Balance sheet, income statement, statement of cash flows, and capital statement B. Income statement, capital statement, statement of cash flows, and balance sheet C. Balance sheet, capital statement, statement of cash...

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FASB Comment Letters - Dell

Company FASB wants to institute a new regulation on the financial statements about the share-based payment, and for these procedure the organization releases on its webite an exposure draft on the subject. One of the reasons for sharing this information is to enhance the proposed techniques through collaboration of companies and / or individuals in the accounting area. Dell, an IT company that registered $2,37 billion net income in 2013, was one of the companies that contributed with the evaluation...

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review questions chapter 3

2 Describe the purpose of each of the four major financial statements. The purposes of each of the 4 major financial statements are: Income Statement—the purpose of the income statement is to provide a financial summary of the firm’s operating results during a specified time period. It includes both the sales for the firm and the costs incurred in generating those sales. Other expenses, such as taxes, are also included on this statement. Balance Sheet—the purpose of the balance sheet is to present...

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Selected Companies Pro Forma

A pro forma income statement and balance sheet showing the future planning and growth of a company. The pro forma income statement and balance sheet will explain a cash budget, underlying assumptions of calculations, calculations of different ratio analysis, and make recommendations to management. “The most comprehensive means of financial forecasting is to develop a series of pro forma, or projected, financial statements” (2005, Block & Hirt, p. 88, chap. 4). Financial Statements A set of financial...

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principles of accounting HT513

bookkeeping accounts for the dual aspect of financial statement transactions. INTRODUCTION OF FINANCIAL STATEMENT • Information from a trial balance is used to prepare business financial statements in order to evaluate the performance of the business. • Financial statements has: - Income statement - Statement of financial position. • An income statement is a combination of: - A trading account - A profit and loss account EXAMPLE OF INCOME STATEMENT EXAMPLE OF BALANCED SHEET INTRODUCTION BOOK OF...

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Module 4 Homework + Answers Total Points: 40 Chapter 5 1) The Securities & Exchange Commission requires publically traded companies to have their financial statements audited by their internal auditors.  True or False Answer: The Securities & Exchange Commission requires publically traded companies to have their financial statements audited by an independent registered public accounting firm. 2) Which of the following would not be classified as a current asset?  A. Accounts receivable B...

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Capital Expenditure and Revenue Expenditure

-Maintenance of fixed assets -Administration of business -Selling and distribution expenses The main difference between the two forms of expenditure is that effect it has of the financial statement of business as the Balance Sheet and the Income Statement. Revenue expenditure affects in the income statement since it is fully consume within the period or carry forward to the next period as left over. Capital expenditure improve the net book or obtain value of an asset or getting a new asset...

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Calculation of Financial Ratios for Google

year's net income divided by total equity expressed as a percentage. b. ROI - Return On Investment - Is the ratio of money gained or lost on an investment relative to the amount of money invested. ROI is used to compare returns on investments where the money gained or lost — or the money invested — are not easily compared using monetary values. ROI is a measure of cash (or potential cash) generated by an investment, or the cash lost due to the investment. It measures the cash flow or income stream...

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Chapter Two

• The financial statement showing a firm's accounting value on a particular date is the: balance sheet. • A current asset is: cash or an item currently owned by the firm that will convert to cash within the next 12 months. • The long-term debts of a firm are liabilities: that do not come due for at least 12 months. • Net working capital is defined as: current assets minus current liabilities. • A __ liquid __ asset is one which can be quickly converted into cash without significant...

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Harriets Hats

on hand reveals supplies worth $1,800. The balance sheet reflected a balance in the office supplies account of $3,700 before any year-end adjustments were made. What is the amount of supplies expense that will be included on the current year income statement? 2. On December 1, 20Y1, Nelson collected rent of $7,200 (for December, January, and February rent) from a tenant renting some space in its warehouse and credited Unearned Rent Revenue for the entire amount. What is the balance sheet value...

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Profits with No Cash

therefore the total income from the transactions may not be available in cash during the end of the financial period. The transactions in the financial statements are reflecting the credit transaction in both the debtor’s account and the cash account. The amount of money with the debtors might not be at hand, but an income assumed to have been earned when the transaction are already made and not when the money is received. This therefore may result in profits reflected in the income statement while no cash...

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Whole Foods Market

developed for tax purposes. However, because of tax law requirements, if a company uses this assumption for tax purposes it must also use it for its financial statements. Whole Foods Market uses LIFO (Last-in, First-out) method to determine cost. It does not coincide with the actual movement of goods. LIFO is used during inflation to defer income tax payments. Under LIFO the goods in inventory at the beginning of the period are assumed to remain in the ending inventory (perhaps for decades). c) Assume...

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Mos 3360 Ch 3 review

accounting cycle and the steps in the recording process. Explain the reasons for and prepare adjusting entries. Explain how the type of ownership structure affects the financial statements. Prepare closing entries and consider other matters relating to the closing process. Prepare a 10-column work sheet and financial statements. After studying Appendix 3A, you should be able to: Identify adjusting entries that may be reversed. THE ACCOUNTING INFORMATION SYSTEM The Accounting Information System ...

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pro forma

Sheet, the accounts receivables have been declining from 2010-2012. The Income Statement shows that sales have been consistent the cost of sales has shifted causing the EBIT to drop in 2011 and to rise in 2012. Acting as CEO in the first phase of the new business opportunity, SNC has the position to increase the net income and the working capital. (See Balance Sheet and Income Statement). For the first phase, phase 1 SNC encounter the decision to include a new...

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accounts payable liability account.  Conversely, on the Income Statement, one would expect to see an increase in the patient revenue account since the deal was that the MCO had longer to pay in trade for a HIGHER reimbursement rate.  Also, on the Income Statement as the receivables account increases then you would also see an increase in the Provision for Doubtful Accounts. How might negotiating an MCO contract affect financial statements? The accounts that will be impacted on the Balance Sheet...

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Perpetual Mercy Hospital - Problem Statement 2

  Problem Statement The Downtown Health Clinic (DHC), opened in 1999 and overseen by Perpetual Mercy Hospital, is concerned about the possibility of a similar clinic opening five blocks away from their facility. The main concerns are that the new clinic may attract DHC’s current patients and that a similar clinic in such proximity could hinder financial and profitability progress. The situation and four possible alternatives were analyzed in order to arrive at a recommendation of how DHC can...

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Steps to Preparing a Worksheet

classified balance sheet. Worksheet- a multiple-column form that may be used in the adjustment process and in preparing financial statements. *It is not a permanent accounting record; it is neither a journal or a part of the general ledger. It is merely a device used to make it easier to prepare adjusting entries and the financial statements. Study Objective 1: Steps in Preparing a Work Sheet Step 1. Prepare a Trial Balance on the Work Sheet Step 2...

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ACCT 220 Chapter 4 Fun Quiz

question or best lettered completion for the numbered partial statement. Record the letter next to the number. 1. _____ The account, Supplies, will appear in the following debit columns of the worksheet. a. Trial balance b. Adjusted trial balance c. Balance sheet d. All of these answer choices are correct 2. _____ If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a a. debit to the owner's capital account...

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Financial Analysis for Nestle

Income Statement Nestlé S.A. | Consolidated income statement | for the year ended 31 December 2008-2010 | In million of CHF |   | 2010 | 2009 | 2008 |   |   |   |   |   |   | Sales |   |   | 109,722 | 107,618 | 109,908 | Cost of goods sold |   | 45,849 | 45,208 | 47,339 | Gross profit |   | 63,873 | 62,410 | 62,569 | Selling, general, and admin.expense | 45,798 | 45,140 | 44,916 | Research and development costs | 1,881 | 2,021 | 1,977 | EBIT Earnings Before Interest, Taxes,...

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Why Profit Does Not Equal Cash

CASH Why is profit not equal to cash coming in?   Some differences such as loans received which do not impact the profit and loss statement are pretty obvious.   Others may not be as obvious but you can break them down into three main areas: -       Revenue is booked at sale.   In many cases a sale is recorded for accounting purposes in the profit and loss statement when a company delivers a product or service.   In many cases, no cash has been exchanged at the time of sale since customers typically...

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Zoom SnowBoards: Audit Planning Document

decrease in sales and lower net income creates an incentive for overstated sales and Net Income AAR can decrease as risk of misstatements on the Income Statement increases. External users may rely heavily on reported Net Income. Overstated net income implies assertion of occurrence, completeness and accuracy.. 2. Industry issue: Sales’ price gone down to compete with U.S’s market Increase the incentive to smoothing the net income make the financial statement looks better. AAR can decrease...

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