Chapter 12 - extraordinary items and so forth

Information about Chapter 12 - extraordinary items and so forth

Published on July 21, 2014

Author: ffakoor

Source: authorstream.com

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Income and Changes in Retained Earning : Income and Changes in Retained Earning Professor : Farima Fakoor , MBA DBA Candidate Course: Acctg 1A Chapter 12 Unusual Income Statement Items : Unusual Income Statement Items Discontinued Operations Extraordinary Items Changes In Accounting Principles 2 Discontinued Operation: Discontinued Operation Discontinued Operations: This section contains information concerning any segment of a business (such as a division, department, or product line) that is sold or closed during the year. The amount displayed in this section is calculated as follows: +/- Profits or losses from operating the segment before it is disposed of +/- Gains or losses from the act of selling or closing the business Net gain or loss on discontinued operations before taxes -/+ Taxes paid on a net gain or taxes saved on a net loss Net gain or loss on discontinued operations 3 Extraordinary items: Extraordinary items These are revenues or expenses that result from events that are "unusual and infrequent." natural disasters (flood, earthquake, fire) and condemnation of land or buildings. Extraordinary items must be shown net of tax. 4 Changes in Accounting Principles: Changes in Accounting Principles This section shows the effect of changing from one accepted accounting principle to another. Example: A corporation might choose to change its depreciation method from the straight-line to the declining-balance method. 5 Unusual Income Statement Items – Cont’d : Unusual Income Statement Items – Cont’d Change in Accounting Principle P rior-Period Adjustments 6 Try to answer the following questions: Try to answer the following questions Why are the results of discontinued operations, extraordinary items, and changes in accounting principles shown in separate sections at the bottom of the income statement? Why are discontinued operations, extraordinary items, and changes in accounting principles shown net of tax? 7 Questions: Questions 8

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