13-1 operating activities electronic presentation by douglas cloud pepperdine university chapter f13

13-1

Operating Operating ActivitiesActivities

Operating Operating ActivitiesActivities

Electronic Presentation by Douglas Cloud

Pepperdine University

Electronic Presentation by Douglas Cloud

Pepperdine University

Chapter Chapter F13F13

13-2

1. Identify the purpose and major components of the income statement.

2. Explain and apply rules for measuring revenues and receivables and reporting revenue transactions.

3. Describe reporting rules for inventories and cost of goods sold and compare reporting of inventories for merchandising and manufacturing companies.

ObjectivesObjectivesObjectivesObjectives

Once you have Once you have completed this chapter, completed this chapter, you should be able to:you should be able to:

Once you have Once you have completed this chapter, completed this chapter, you should be able to:you should be able to:

ContinuedContinuedContinuedContinued

13-3

4. Explain and apply rules for measuring cost of goods sold and inventories and describe the effects of income taxes on the choice of inventory estimation method.

5. Identify routine and nonroutine events that affect a company’s income statement.

ObjectivesObjectivesObjectivesObjectives

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11ObjectiveObjectiveObjectiveObjective

Identify the purpose and major components of an income statement.

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Basic Operating ActivitiesBasic Operating ActivitiesBasic Operating ActivitiesBasic Operating Activities

The income statement reports the results of operating activities for a fiscal period on an accrual basis.

The income statement reports the results of operating activities for a fiscal period on an accrual basis.

13-6

For the Year Ended December 31, 2005 2004Net sales revenue $3,235,600 $686,400Cost of goods sold (1,954,300) (457,600)Gross profit 1,281,300 228,800Selling, general and administrative expenses (1,094,700) (148,300)Operating income 186,600 80,500Interest expense (20,400) (4,800)Pretax income 166,200 75,700Income taxes (49,860) (22,710)Net income $ 116,340 $ 52,990

Earnings per share $ 0.29 $ 0.13

The first item on the income The first item on the income statement is net sales revenue.statement is net sales revenue.The first item on the income The first item on the income

statement is net sales revenue.statement is net sales revenue.

Exhibit 1Exhibit 1Exhibit 1Exhibit 1 Income Statement for Mom’s Cookie Company

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Cost of goods sold is subtracted Cost of goods sold is subtracted from net sales revenue to from net sales revenue to

compute gross profit.compute gross profit.

Cost of goods sold is subtracted Cost of goods sold is subtracted from net sales revenue to from net sales revenue to

compute gross profit.compute gross profit.


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The expenses for marketing and distributing a The expenses for marketing and distributing a company’s products and managing its company’s products and managing its

operations are subtracted from gross profit to operations are subtracted from gross profit to calculate operating income.calculate operating income.

The expenses for marketing and distributing a The expenses for marketing and distributing a company’s products and managing its company’s products and managing its

operations are subtracted from gross profit to operations are subtracted from gross profit to calculate operating income.calculate operating income.


13-9



Non-operating expenses or losses, such as Non-operating expenses or losses, such as Interest Expense, Interest Expense, are subtracted from are subtracted from

operating income to compute pretax income.operating income to compute pretax income.

Non-operating expenses or losses, such as Non-operating expenses or losses, such as Interest Expense, Interest Expense, are subtracted from are subtracted from

operating income to compute pretax income.operating income to compute pretax income.


Non-operating income or gains are Non-operating income or gains are added, to compute pretax income.added, to compute pretax income.

Non-operating income or gains are Non-operating income or gains are added, to compute pretax income.added, to compute pretax income.

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Income tax expense is Income tax expense is subtracted from pretax income subtracted from pretax income

to calculate net income.to calculate net income.

Income tax expense is Income tax expense is subtracted from pretax income subtracted from pretax income

to calculate net income.to calculate net income.


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Earnings per share is reported on a Earnings per share is reported on a corporate income statement.corporate income statement.

Earnings per share is reported on a Earnings per share is reported on a corporate income statement.corporate income statement.


13-12

22Explain and apply rules for measuring revenues and receivables and reporting revenue transactions.

ObjectiveObjectiveObjectiveObjective

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Sales of Goods and Services to Customers

Sales of Goods and Services to Customers

Activity

Operating Revenues

Operating Revenues

Income Statement

Cash

Accounts Receivable

Cash

Accounts Receivable

Balance Sheet

Cash Received

from Customers

Cash Received

from Customers

Statement of Cash Flows

Exhibit 2Exhibit 2Exhibit 2Exhibit 2 The Effect of Sales and Services on the Financial Statements

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Revenues and ReceivablesRevenues and ReceivablesRevenues and ReceivablesRevenues and Receivables

1. The selling company has completed most of the activities necessary to produce and sell the goods or services.

2. The selling company has incurred the costs associated with producing and selling the goods or services or can reasonably measure those costs.

3. The selling company can measure objectively the amount of revenue it has earned.

4. The selling company is reasonably sure that it is going to collect cash from the purchaser.

Revenue should be recognized when four criteria have

been met.

Revenue should be recognized when four criteria have

been met.

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Recognizing Revenue for Recognizing Revenue for Long-Term ContractsLong-Term Contracts

Recognizing Revenue for Recognizing Revenue for Long-Term ContractsLong-Term Contracts

Constructo, Inc. contracts to

construct a new building for $20

million.

Constructo, Inc. contracts to

construct a new building for $20

million.The project will take three

years. Constructo, Inc. estimates at the end of

2004, the first year of the contract, 20 percent of the work has been completed.

The project will take three years. Constructo, Inc. estimates at the end of

2004, the first year of the contract, 20 percent of the work has been completed.

For the fiscal period ending in 2004,

Constructo, Inc. will recognize revenue of $4

million (20% of $20 million).

For the fiscal period ending in 2004,

Constructo, Inc. will recognize revenue of $4

million (20% of $20 million).

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Sales Discounts and ReturnsSales Discounts and ReturnsSales Discounts and ReturnsSales Discounts and Returns

Revenues are reported on the income

statement net of discounts and

expected returns.

Revenues are reported on the income

statement net of discounts and

expected returns.

A discount is a reduction in the normal sales price to encourage

customers to buy large quantities of goods (a quantity discount) or

to pay their accounts early (a sales discount).

A discount is a reduction in the normal sales price to encourage

customers to buy large quantities of goods (a quantity discount) or

to pay their accounts early (a sales discount).

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Mom’s Cookie Company sells goods priced at $5,000 to a customer on November 4, 2004,

and offers a 2% discount if the customer pays in full within 10 days of the purchase.

Mom’s Cookie Company sells goods priced at $5,000 to a customer on November 4, 2004,

and offers a 2% discount if the customer pays in full within 10 days of the purchase.

ASSETS =ASSETS = LIABILITIELIABILITIESS

+ OWNERS’ EQUITY+ OWNERS’ EQUITY

Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

11/4 Accounts Rec. 5,000Sales Revenue 5,000

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If the customer pays within the discount period, the company reduces the revenue by

$100 ($5,000 x 2%) and records the discount.

If the customer pays within the discount period, the company reduces the revenue by

$100 ($5,000 x 2%) and records the discount.



Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

11/4 Cash 4,900Sales Discount –100Accounts Rec. –5,000

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ReturnsReturns

Like sales discounts, sales returns are

subtracted from sales revenues in reporting

net operating revenues on the

income statement.

Like sales discounts, sales returns are

subtracted from sales revenues in reporting

net operating revenues on the

income statement.

13-20


Textbook Publishing Company sells $5 million of books during fiscal year 2004.

Textbook Publishing Company sells $5 million of books during fiscal year 2004.



Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

12/31 Sales Returns –500,000Allowance for Returns –500,000

From past experience, the company estimates that $500,000 of its 2004 sales

will be returned in 2005.

From past experience, the company estimates that $500,000 of its 2004 sales

will be returned in 2005.

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A major principle of accounting is the

matching principle.

A major principle of accounting is the

matching principle.

MATCHING

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The matching principle is an effort to match revenues and expenses in the period in which they occur so that revenues, expenses, and net

income are not misstated.

The matching principle is an effort to match revenues and expenses in the period in which they occur so that revenues, expenses, and net

income are not misstated.

13-23


Textbook Publishing received a return of $100,000 (sales price) on January 12, 2005, from a credit

customer. The goods cost the company $75,000.





Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

1/12 Allowance forReturns 100,000Accounts Rec. –100,000

ContinuedContinuedContinuedContinued

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Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

1/12 Merchandise Inventory 75,000Cost of Goods Sold 75,000

13-25

Mom’s Cookie Company has a balance in Allowance for Doubtful Accounts of $1,000

at the end of its 2004 fiscal year before adjustments are made for the year.

Mom’s Cookie Company has a balance in Allowance for Doubtful Accounts of $1,000

at the end of its 2004 fiscal year before adjustments are made for the year.

Management evaluates the company’s credit sales and outstanding receivables and

determines that the amount of the allowance account should be $5,000.

Management evaluates the company’s credit sales and outstanding receivables and

determines that the amount of the allowance account should be $5,000.

Uncollectible AccountsUncollectible AccountsUncollectible AccountsUncollectible Accounts

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Since the current allowance balance is $1,000, the allowance account needs to be increased by $4,000.

Since the current allowance balance is $1,000, the allowance account needs to be increased by $4,000.




Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

12/31 Doubtful Accounts Exp. –4,000Allowance for Doubtful Accts. –4,000

Doubtful Doubtful AccountsAccounts

ExpenseExpense is a is a selling expenseselling expense

Doubtful Doubtful AccountsAccounts

ExpenseExpense is a is a selling expenseselling expense

13-27

On February 12, 2005, Mom’s Cookie Company determines that $800 owed by

Home Goods Company cannot be collected.

On February 12, 2005, Mom’s Cookie Company determines that $800 owed by

Home Goods Company cannot be collected.




Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

2/12 Accounts Receivable –800Allowance for Doubtful Accts. 800

13-28

Warranty CostsWarranty Costs

Products under warranty allow the

customer to return a defective product for

replacement or refund.

Products under warranty allow the

customer to return a defective product for

replacement or refund.

13-29


From sales in March, 2004, Harris Company estimates warranty costs of $12,000 will be

incurred in April, May, and June.

From sales in March, 2004, Harris Company estimates warranty costs of $12,000 will be

incurred in April, May, and June.



Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

3/31 Warranty Expense –12,000Warranty Obligations 12,000

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On May 15, Harris replaces a faulty motor on an appliance. The cost of the motor is $300 and the

cost of labor to install the motor is $100.

On May 15, Harris replaces a faulty motor on an appliance. The cost of the motor is $300 and the

cost of labor to install the motor is $100.



Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

5/15 Warranty Obligations –400Parts Inventory –300Wages Payable 100

13-31

33Describe reporting rules for inventories and cost of goods sold and compare reporting of inventories for merchandising and manufacturing companies.


13-32

Exhibit 3Exhibit 3Exhibit 3Exhibit 3 The Effect of Inventory Transactions on the Financial Statements

13-33

On May 4, 2004, Mom’s Cookie Company purchased $10,000 of inventory on credit.

On May 4, 2004, Mom’s Cookie Company purchased $10,000 of inventory on credit.



Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

5/4 Merchandise Inventory 10,000Accounts Payable 10,000

Reporting Inventories and Reporting Inventories and Cost of Goods SoldCost of Goods Sold


13-34

On May 6, Mom’s Cookie Company sold $4,000 of that inventory.

On May 6, Mom’s Cookie Company sold $4,000 of that inventory.



Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

5/6 Cost of Goods Sold –4,000Merchandise Inventory –4,000



13-35

On May 12, Mom’s Cookie Company pays for half of the inventory purchase.On May 12, Mom’s Cookie Company

pays for half of the inventory purchase.



Date AccountsCash

Other Assets

ContributedCapital

RetainedEarnings

5/12 Accounts Payable –5,000Cash –5,000



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Purchase discounts for paying for goods and services within the

discount period should result in both Inventory and Accounts

Payable being reduced.

Purchase discounts for paying for goods and services within the

discount period should result in both Inventory and Accounts

Payable being reduced.

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Raw Materials

Raw Materials

Work-in-Process

Work-in-Process

Labor and Overhead

Costs

Labor and Overhead

Costs

Finished Goods

Finished Goods

Exhibit 4Exhibit 4Exhibit 4Exhibit 4 Components of Manufacturing Inventory

Inventories

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Raw materials inventory includes the

costs of component parts or ingredients that

become part of the product being manufactured.

Raw materials inventory includes the

costs of component parts or ingredients that

become part of the product being manufactured.

Manufacturing



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Work-in-process inventory includes the

costs of materials, labor, and overhead that have

been applied to products that are in the process of

being manufactured.

Work-in-process inventory includes the

costs of materials, labor, and overhead that have

been applied to products that are in the process of

being manufactured.



Manufacturing

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Finished goods inventory includes the costs of products that

have been completed in the manufacturing

process and are available for sale to

customers.

Finished goods inventory includes the costs of products that

have been completed in the manufacturing

process and are available for sale to

customers.



Manufacturing

13-41

Exhibit 5Exhibit 5Exhibit 5Exhibit 5 Computation of Manufacturing Inventory Costs

13-42

44Explain and apply rules for measuring cost of goods sold and inventories and describe the effects of income taxes on the choice of inventory estimation method.


13-43

Measuring InventoryMeasuring InventoryMeasuring InventoryMeasuring Inventory

Hydro Company sells and services agricultural

irrigation equipment. On March 20, 2004, Hydro

purchased 20 pump motors at $200 each. Hydro

already had 8 identical motors on hand, for which

it had paid $175.

Hydro Company sells and services agricultural

irrigation equipment. On March 20, 2004, Hydro

purchased 20 pump motors at $200 each. Hydro

already had 8 identical motors on hand, for which

it had paid $175.

13-44


On March 22, 2004, a customer purchased one

motor. Should the company record the cost of goods sold for the motor as

$175 or as $200?

On March 22, 2004, a customer purchased one

motor. Should the company record the cost of goods sold for the motor as

$175 or as $200?

13-45

8 units @ $175 per unitMar. 1 Sold 17 units @ $175 per unit


First-In, First-Out Method

20 units @ $200 per unitMar. 20

Using the first-in, first-out method, the cost of the motor sold would be recorded as $175 because $175 is the cost of the

oldest item in Hydro’s inventory.

Using the first-in, first-out method, the cost of the motor sold would be recorded as $175 because $175 is the cost of the

oldest item in Hydro’s inventory.

13-46

8 units @ $175 per unitMar. 1Sold 1


Last-In, First-Out Method

20 units @ $200 per unitMar. 20 19 units @ $200 per unit

Using last-in, first-out, Hydro would record the cost of the motor sold on March 22 as $200 because $200 is the cost of the

most recent item in Hydro’s inventory.

Using last-in, first-out, Hydro would record the cost of the motor sold on March 22 as $200 because $200 is the cost of the

most recent item in Hydro’s inventory.

13-47

Using the weighted-average method, Hydro would record the cost of the

motor sold on March 22 as $192.86.

Using the weighted-average method, Hydro would record the cost of the

motor sold on March 22 as $192.86.

8 units @ $175 per unit = $1,400Mar. 1


Weighted-Average Method

20 units @ $200 per unit = 4,000Mar. 20

28 units $5,400$192.86 per unit

$5,400 $5,400 ÷ 28 units÷ 28 units$5,400 $5,400 ÷ 28 units÷ 28 units

13-48


Mom’s Cookie Company has finished goods inventory of $3,000 at the end of

February 2005. The inventory includes 150 cases of cookies at a cost of $20 per case. Exhibit 6 (Slide 49) summarizes unit costs

and sales for the company for March.

Mom’s Cookie Company has finished goods inventory of $3,000 at the end of

February 2005. The inventory includes 150 cases of cookies at a cost of $20 per case. Exhibit 6 (Slide 49) summarizes unit costs

and sales for the company for March.

13-49

March 1 Inventory 150 $20.00$ 3,000

March 8 Batch 3,000 20.3060,900

March 18 Batch 3,000 20.6061,800

March 20 Sales 5,200March 28 Batch 3,000 20.90

62,700March 31 Sales 3,600

Total Cost of Goods Available for Sale

$188,400


March 8 Batch 3,000 20.3060,900

March 18 Batch 3,000 20.6061,800


62,700March 31 Sales 3,600


$188,400

Exhibit 6Exhibit 6Exhibit 6Exhibit 6 Unit Costs and Sales for Mom’s Cookie Company for March

13-50


First-In, First-Out MethodPerpetual Inventory System

Inventory purchased on March 8 and March 18

Beg. Inv.

3,000 units @ $20.60 per unitMar. 18

Mar. 8 3,000 units @ $20.30 per unit

150 units @ $20.00 per unit

13-51




3,000 units @ $20.60 per unit

Mar. 8

Mar. 18


150 units @ $20.00 per unit Sold allSold all0 units @ $20.00 per unit

Sold 5,200 units on March 20

Beg. Inv.

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Mar. 8

Mar. 18



Sold allSold all0 units @ $20.30 per unit


Beg. Inv.

13-53





Mar. 8

Mar. 18



Sold 2,050Sold 2,050950 units @ $20.60 per unit


Beg. Inv.

13-54





Mar. 8

Mar. 18


0 units @ $20.00 per unit = $ 0

= 0

= 19,570

Ending inventory = $19,570

Beg. Inv.

13-55



Purchased 3,000 units at $20.90 per unit on March 28



Mar. 8

Mar. 18





Beg. Inv.

13-56






Mar. 8

Mar. 18

Mar. 28




Sold 950Sold 950950 units @ $20.60 per unit0 units @ $20.60 per unit

Beg. Inv.

13-57





Mar. 8

Mar. 18

Mar. 28




Sold 2,650Sold 2,650

950 units @ $20.60 per unit0 units @ $20.60 per unit



Beg. Inv.

13-58





Mar. 8

Mar. 18

Mar. 28





= $ 0

= 0

= 0


= 7,315

Beg. Inv.

13-59


Last-In, First-Out MethodPerpetual Inventory System



Mar. 8

Mar. 18



Sold allSold all



Beg. Inv.

13-60





Mar. 8

Mar. 18



Sold 2,200Sold 2,200



Beg. Inv.

13-61



150 units @ $20.00 per unitBeg. Inv.


Mar. 8

Mar. 18




= $ 3,000

= 16,240

= 0


13-62





Mar. 8

Mar. 18





Purchased 3,000 units on March 28

Beg. Inv.

13-63





Mar. 8

Mar. 18



Mar. 28 3,000 units @ $20.90 per unit0 units @ $20.90 per unit


Sold allSold all

Beg. Inv.

13-64





Mar. 8

Mar. 18




Mar. 28 0 units @ $20.90 per unit


Sold 600Sold 600200 units @ $20.30 per unit

Beg. Inv.

13-65




Mar. 8

Mar. 18





= $3,000

= 4,060

= 0


= 0

Beg. Inv.


13-66


Average Inventory MethodPerpetual Inventory System


Mar. 8 3,000 units @ $20.30 per unit3,000 units @ $20.30 per unit

= $ 3,000

= 60,900

= 61,800

$125,700


Mar. 20 Average cost $20.439

$125,700 ÷ 6,150 units

Beg. Inv.

13-67


150 units @ $20.00 per unitMar. 20 6,150 units @ $20.439 per unit

Mar. 20 3,000 units @ $20.30 per unit–5,200 units @ $20.439 per unit

= $125,700

= 106,283

$ 19,417




13-68


150 units @ $20.00 per unitMar. 20 950 units @ $20.439 per unit = $19,417

= 62,700

$ 82,117

Purchased 3,000 units on March 28 at $20.90 per unit



$82,117 ÷ 3,950 units


13-69


150 units @ $20.00 per unitMar. 20 3,950 units @ $20.789 per unit


–3,600 units @ $20.789 per unitMar. 31


= $82,117

= 74,841

$ 7,276


13-70


To determine cost of goods sold, we need to recall the amount for cost of goods available for sale, which is $188,400.

Click the button next to me to review how this amount was determined.

To determine cost of goods sold, we need to recall the amount for cost of goods available for sale, which is $188,400.

Click the button next to me to review how this amount was determined.

13-71


Regardless of the inventory method used, the cost of goods available for

sale is the same amount .

Regardless of the inventory method used, the cost of goods available for

sale is the same amount .

13-72


Now, let’s determine the cost of goods sold when using the lifo perpetual inventory method.

Now, let’s determine the cost of goods sold when using the lifo perpetual inventory method.

Cost of goods available for sale $188,400– Ending inventory 7,060Cost of goods sold $181,340

13-73


How about fifo perpetual?How about fifo perpetual?

Cost of goods available for sale $188,400– Ending inventory 7,315Cost of goods sold $181,085

13-74

Inventory Estimation Inventory Estimation and Income Taxesand Income Taxes

Inventory Estimation Inventory Estimation and Income Taxesand Income Taxes

The primary reason for the use of LIFO is the tax advantage that LIFO

provides to many companies.

The primary reason for the use of LIFO is the tax advantage that LIFO

provides to many companies.

13-75

Sales revenues $3,235,600 $3,235,600 Cost of goods sold (1,946,800) (1,954,300) Gross profit 1,288,800 1,281,300 Selling, general, and admin. exp. (1,094,700) (1,094,700) Operating income 194,100 186,600 Interest expense (20,400) (20,400)Pretax income 173,700 166,200Income tax (52,110) (49,860)Net income $ 121,590 $ 116,340

For the Year Ended December 31, 2005 FIFO LIFO For the Year Ended December 31, 2005 FIFO LIFO

Exhibit 12Exhibit 12Exhibit 12Exhibit 12 Income Statement for Mom’s Cookie Company Using FIFO and LIFO Inventory Estimation

13-76

Lower of Cost or MarketLower of Cost or MarketLower of Cost or MarketLower of Cost or Market

GAAP require companies to compare the cost determined through inventory estimation

methods with the current market cost of the

inventory on hand at the end of the fiscal year.




If current market cost is below the cost resulting

from the use of an estimation method such as FIFO or LIFO, the

inventory must be written down to the current

market costs.




market costs.

13-77











market costs.




market costs.

This requirement is known as the lower of cost or market inventory rule.

This requirement is known as the lower of cost or market inventory rule.

13-78


Tucker Company acquired $500,000 of merchandise on August 18, 2004. By

December 31, 2004, the end of its fiscal year, it had sold $300,000 of the

merchandise. Tucker estimates that the market value of the remaining inventory

is $140,000 on December 31, 2004.

Tucker Company acquired $500,000 of merchandise on August 18, 2004. By

December 31, 2004, the end of its fiscal year, it had sold $300,000 of the

merchandise. Tucker estimates that the market value of the remaining inventory

is $140,000 on December 31, 2004.

13-79


In keeping with the lower of cost or market rule, Tucker must recognize a $60,000 loss

for its inventory at the end of the year.

In keeping with the lower of cost or market rule, Tucker must recognize a $60,000 loss

for its inventory at the end of the year.



Date Accounts CashOther Assets

ContributedCapital

RetainedEarnings

12/31 Loss on Inventory –60,000Merchandise Inventory –60,000

13-80

55Identify routine and nonroutine events that affect a company’s income statement.


13-81

Operating ExpensesOperating ExpensesOperating ExpensesOperating Expenses

Most operating expenses other than cost of goods

sold are period costs.

Most operating expenses other than cost of goods

sold are period costs.

13-82

Operating ExpensesOperating ExpensesOperating ExpensesOperating Expenses

Yes, period costs are expensed in the fiscal

period in which they occur.

Yes, period costs are expensed in the fiscal

period in which they occur.

13-83

Use of Resources in

Operating Activities

Use of Resources in

Operating Activities

ActivityIncome

Statement

Operating Expenses

Operating Expenses

Balance Sheet

Assets Current Assets

Liabilities Current

Liabilities

Assets Current Assets

Liabilities Current

Liabilities

Cash PaidCash Paid

Statement of Cash Flows

Exhibit 13Exhibit 13Exhibit 13Exhibit 13 The Effect of Period Costs on the Financial Statements

13-84

Discontinued operations, extraordinary items, and accounting changes may appear on a company’s

income statement.

Discontinued operations, extraordinary items, and accounting changes may appear on a company’s

income statement.

Non-recurring Gains and LossesNon-recurring Gains and LossesNon-recurring Gains and LossesNon-recurring Gains and Losses

13-85

Discontinued operations are product lines or major parts of a company from which the company will no

longer derive income …

Discontinued operations are product lines or major parts of a company from which the company will no

longer derive income …


13-86

…because it has sold or closed the facilities that produced the

product line or that included that part of the company.

…because it has sold or closed the facilities that produced the

product line or that included that part of the company.


13-87

Extraordinary items are gains or losses that are both unusual and infrequent for a

particular company.

Extraordinary items are gains or losses that are both unusual and infrequent for a

particular company.


13-88


A cumulative effect of a change in accounting method is a gain or loss associated with changing accounting methods or adopting

new accounting standards.

A cumulative effect of a change in accounting method is a gain or loss associated with changing accounting methods or adopting

new accounting standards.

13-89

THE ENDTHE END

CCHAPTERHAPTER F13 F13

13-91


March 8 Batch 3,000 20.3060,900

March 18 Batch 3,000 20.6061,800


62,700March 31 Sales 3,600


$188,400


March 8 Batch 3,000 20.3060,900

March 18 Batch 3,000 20.6061,800


62,700March 31 Sales 3,600


$188,400

Exhibit 6Exhibit 6Exhibit 6Exhibit 6 Unit Costs and Sales for Mom’s Cookie Company for March

Return to Slide 70

13-1 operating activities electronic presentation by douglas cloud pepperdine university chapter f13

Documents

net income

nonoperating income

companys income statement

effects of income taxes

net sales revenue

operating income186

cost of goods

nonoperating expenses