NAMES: ID’S: Chapter 5 Case 5-1 Page 212

Outline Introduction Case question 5-1 The income statement problem The deficiencies of the problem Conclusion

Introduction In intermediate accounting we have many topics to present about, such as; the balance sheet or the ledger, I chose my topic that I will be talking about is the income statement; income statement is a financial statement that gives operating results for a specific period.

Case question John Amos Corporation, the business of john started on January. 1, 2003. He had a successful work with no trouble, until he suddenly wants a bank loan for the expansion of the business, so the bank wanted his audited income statement for the year of 2003, he had an income statement that was made by the accountant of john. ( identify the deficiencies of the income statement before it is submitted to the bank)

The companies statement

The deficiencies of the income statement The heading is inappropriate. The heading should include the name of the company and the period of time for which the income statement is presented.   Gain on recovery of insurance proceeds should be classified as an extraordinary item in a separate section of the income statement. Cost of goods sold is usually listed as the first expense, followed by selling, administrative, and other expenses. Advertising expense is a selling expense and should usually be classified as such, unless this expense is unusually different from previous periods.

The deficiencies of the income statement (cont.) Loss on obsolescence of inventories might be classified as an unusual item. Loss on discontinued operations requires a separate classification after income from continuing operations. Intra-period income tax allocation is required to relate income tax expense to income from continuing operations. Per share data is a required presentation for income from continuing operations, discontinued operation.

References http://en.wikipedia.org/wiki/Income_statement http://www.businessdictionary.com/definition/income-statement.html

Conclusion   The main points of the presentation was that the income statement had some errors, and those errors had to be corrected before it was given to the bank to get the loan.