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Chapter 4: 22Q (page 180)

Discuss the appropriate treatment in the income statement for the following items:

(a) Loss on discontinued operations.

(b) Non-controlling interest allocation.

(c) Earnings per share.

(d) Gain on sale of equipment.

Short Answer

Expert verified

a) Reported between income from continuing operations and net income

b) Reported after the net income

c) Reported after the non-controlling interest allocation

d) Reported in other revenues and gains section

Step by step solution

01

Meaning of Income Statement

An Income statement includes four main items: revenue, gains, expenses, and losses. It is considered one of the three main financial statements.

02

Explanation of Loss on discontinued operations

A loss on discontinued operations is reported in the income statement as net of tax between income from continuing operations and net income.

03

Explanation of Non-controlling interest allocation

Non-Controlling interest allocation is reported in the income statement after the net income.

04

Explanation of Earnings per share

Earnings per share are reported in the income statement after the non-controlling interest allocation.

05

Explanation of Gain on sale of equipment

A gain on the sale of equipment is reported in the other revenues and gains in the income statement.

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Most popular questions from this chapter

What is the basis for distinguishing between operating and non-operating items?

Santo Corporation has eight expense accounts in its general ledger, classified as selling expenses. Should Santo report these eight expenses separately in its income statement or report one total amount for selling expenses?

Cooper Investments reported an unusual gain from the sale of certain assets in its 2017 income statement. How does intra period tax allocation affect the reporting of this unusual gain?

On January 1, 2017, Richards Inc. had cash and common stock of \(60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2017, it purchased for cash \)20,000 of debt securities that it classified as available-for-sale. It received interest of \(3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of \)4,000 net of tax. Determine the following amounts for 2017: (a) net income, (b) comprehensive income, (c) other comprehensive income, and (d) accumulated other comprehensive income (end of 2017).

The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.

Instructions

Refer to P&G’s financial statements and the accompanying notes to answer the following questions.

(a) What type of income statement format does P&G use? Indicate why this format might be used to present income statement information.

(b) What are P&G’s primary revenue sources?

(c) Compute P&G’s gross profit for each of the years 2012–2014. Explain why gross profit decreased in 2014.

(d) Why does P&G make a distinction between operating and nonoperating revenue?

(e) What financial ratios did P&G choose to report in its “Financial Summary” section covering the years 2009–2014?
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