chapter 5: preparing the income statement

profit before income taxes * tax rate

income tax expense equation

total operating expenses - sales

operating profit equation

operating income - non-operating expenses

profit before income taxes equation

other comprehensive income

the account that includes changes in carrying value of certain assets and liabilities that end up changing retained earnings

revenues expenses costs of goods sold operating expenses other non-operating items discontinued operations

the order to display the income statement

net income + other comprehensive income = comprehensive income

comprehensive income equation

gross margin - sales - cost of sales

cost of goods sold equation

1. the consumption of the asset results from a transaction that lead to the recognition of revenue 2. the consumption of the asset resulted from the passage of time

criteria for expense recognition