專(zhuān)業(yè)英語(yǔ)課件chap012notes

INCOMEANDCHANGESINRETAINEDEARNINGSChapter

12InformationaboutnetincomecanbedividedintotwomajorcategoriesIncomefromcontinuingoperations.1.Resultsofdiscontinuedoperations.2.Impactofextraordinaryitems.3.Effectsofchangesinaccountingprinciples.Normal,recurringrevenueandexpensetransactions.Unusual,nonrecurringeventsthataffectnetincome.ReportingtheResultsofOperationsThistaxexpensedoesnotincludeeffectsofunusual,nonrecurringitems.Theseunusual,nonrecurringitemsareeachreportednetoftaxes.Income/Lossfromoperatingthesegmentpriortodisposal.Income/Lossondisposalofthesegment.Whenmanagemententersintoaformalplantosellordiscontinueasegmentofthebusiness,therelatedgainsandlossesmustbedisclosedontheincomestatement.DiscontinuedOperationsDiscontinuedOperationsAsegmentmustbeaseparatelineofbusinessactivityoranoperationthatservicesadistinctcategoryofcustomers.Whenmanagemententersintoaformalplantosellordiscontinueasegmentofthebusiness,therelatedgainsandlossesmustbedisclosedontheincomestatement.DiscontinuedOperationsDuring2005,Matrix,Inc.soldanunprofitablesegmentofthecompany.Thesegmenthadanetlossfromoperationsduringtheperiodof$150,000anditsassetssoldatalossof$100,000.Matrixreportedincomefromcontinuingoperationsof$350,000.Allitemsaretaxedat30%.Howwillthisappearontheincomestatement?DiscontinuedOperationsDiscontinuedOperationsIncomeStatementPresentation:DiscontinuedOperationsExtraordinaryItemsMaterialinamount.Gainsorlossesthatarebothunusualinnatureandnotexpectedtorecurintheforeseeablefuture.Reportednetofrelatedtaxes.During2005,Matrix,Inc.experiencedalossof$75,000duetoanearthquakeatoneofitsmanufacturingplantsinNashville.Thiswasconsideredanextraordinaryitem.Thecompanyreportedincomebeforeextraordinaryitemof$175,000.Allgainsandlossesaresubjecttoa30%taxrate.Howwouldthisitemappearonthe2005incomestatement?ExtraordinaryItemsIncomeStatementPresentation:ExtraordinaryItems-ExampleAccountingChangesChangeinAccountingPrincipleOccurswhenchangingfromoneGAAPmethodtoanotherGAAPmethod.Makeacatch-upadjustmentknownasthecumulativeeffectofachangeinaccountingprinciple.Thecumulativeeffectisreportednetoftaxesandafterextraordinaryitems.Alsoin2005,Matrix,Inc.decidedtochangefromthedouble-decliningbalancetothestraight-linemethodfordepreciation.Theeffectofthischangeisanincreaseinnetincomeof$65,000.Matrixreportedincomebeforecumulativeeffectofanaccountingchangeof$122,500duringtheyear.Allitemsofincomearesubjecttoa30%taxrate.Howwouldthisitemappearontheincomestatement?ChangeinAccountingPrincipleIncomeStatementPresentation:Computation:ChangeinAccountingPrincipleChangeinEstimatesRevisionofapreviousaccountingestimate.Thenewestimateshouldbeusedinthecurrentandfutureperiods.Theprioraccountingresultsshouldnotbedisturbed.OnJanuary1,2002,wepurchasedequipmentcosting$30,000,withausefullifeof10yearsandnosalvagevalue.During2005,wedeterminethattheremainingusefulis5years(8-yeartotallife).Weusestraight-linedepreciation.Computethereviseddepreciationexpensefor2005.ChangeinEstimatesRecorddepreciationexpenseof$4,200for2005andsubsequentyears.ChangeinEstimatesLet’smoveontoafewfinaltopics.Often,thePrice-EarningsRatioisusedtoevaluatethereasonablenessofacompany’sstockprice.Price-earningsRatio(P/E)Let’sexaminethisfurther.Ameasureofthecompany’sprofitabilityandearningpowerfortheperiod.Basedonthenumberofsharesissuedandthelengthoftimethatnumberremainedunchanged.EarningsPerShare(EPS)RememberthatMatrix,Inc.hasincomefromcontinuingoperationsof$350,000.Theafter-taxlossfromdiscontinuedoperationswas$175,000.Theextraordinarylosswas$52,500andthecumulativeeffectofaccountingchangeswasagainof$45,500.AssumethatMatrixhasweightedaveragesharesoutstandingof156,250.PrepareapartialincomestatementshowingtheEPSforincomefromcontinuingoperationsandfortheotherspecialitems.

EarningsPerShare(EPS)*Rounded.EarningsPerShare(EPS)Ifpreferredstockispresent,subtractpreferreddividendsfromnetincomepriortocomputingEPS.EPSisrequiredtobereportedintheincomestatement.EarningsPerShare(EPS)Declaredbyboardofdirectors.Notlegallyrequired.Createsliabilityatdeclaration.RequiressufficientRetainedEarningsandCash.AccountingforCashDividendsDateofDeclarationBoardofdirectorsdeclaresthedividend.Recordaliability.DividendDatesOnMarch1,2005,theBoardofDirectorsofMatrix,Inc.declaresa$1.00persharecashdividendonits500,000commonsharesoutstanding.ThedividendispayabletostockholdersofrecordonApril1,andpaidonMay1.Ex-DividendDateThedaywhichservesastheownershipcut-offpointforthereceiptofthemostrecentlydeclareddividend.NOENTRYDividendDatesDateofRecordStockholdersholdingsharesonthisdatewillreceivethedividend.

(Noentry)DividendDatesXApril2005DateofPaymentRecordthepaymentofthedividendtostockholders.DividendDatesOnJune1,2005,acorporation’sboardofdirectorsdeclaredadividendforthe2,500sharesofits$100parvalue,8%preferredstock.ThedividendwillbepaidonJuly15.WhichofthefollowingwillbeincludedintheJuly15entry?

a.DebitRetainedEarnings$20,000.b.DebitDividendsPayable$20,000.c.CreditDividendsPayable$20,000.d.CreditPreferredStock$20,000.$100×8%=$8dividendpershare$8×2,500=$20,000totaldividendDividendDatesAllstockholdersretainsamepercentageownership.Nochangeintotalstockholders’equity.Nochangeinparvalues.Distributionofadditionalsharesofstocktostockholders.AccountingforStockDividendsSummaryofEffectsofStockDividendsandStockSplitsAdjustretainedearningsretroactively.Theadjustmentshouldbedisclosednetofanytaxes.Thecorrectionofanerroridentifiedasaffectingnetincomeinapriorperiod.PriorPeriodAdjustmentsStatementofRetainedEarningswithPriorPeriodAdjustmentNormally,thereare3waysthatfinancialpositionca