Okay, so let's just see all of this in action right here. Learn. Philosophy majors must not be interested in business since so few take the GMAT., b. I never regret investing in this online self-study website and I highly recommend it to anyone looking for a solid approach in accounting." As a member, you'll also get unlimited access to over 84,000 lessons in math, In a separate statement of comprehensive income. Other revenues and expenses are added to operating income. Operating expenses in a multiple-step . appear. An economy is producing output $400\$ 400$400 billion less than the natural level of output, and fiscal policymakers want to close this recessionary gap. Okay? \text { English } & 507 & 3,589 \\ Income Statement (Practice Quiz) Print PDF For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. Some consent that Apple's quality of earnings is low. We're gonna have a specific order that we want to show this stuff. The calculation of the first section shows the gross profit of businessGross Profit Of BusinessGross Profit shows the earnings of the business entity from its core business activity i.e. The amount of money received for goods or services is called _____. He is the sole author of all the materials on AccountingCoach.com. Question: Practice Problems Multiple-Step Income Statement The adjusted trial balance of Peoples Company contained the following information: \[ \frac{\text { Credit }}{\$ 530,000} \] \[ 37,000 \] Instructions: Use the above information to prepare a muitiple-step income statement for the year ended December 31, 2020. It is not theexpense for January, Accrued expenses is a liability that is reported on the balance sheet, Salaries payable is a liability that is reported on the balance sheet, Prepaid expenses is an asset that is reported on the balance sheet, Dividends paid is not an expense and is not reported on the income statement. If a reasonable correlation exists between past and present performance, predictions about future earnings and cash flows can be made. MajorAccountingComputerScienceEconomicsEngineeringEnglishFinanceMarketingPhilosophyPhysicsAverageGMATScore483508513544507489455546575NumberTakingTest25,2337,57316,43229,6883,58920,00115,9255881,223. -Income tax expense: $3,000 What was your cost of goods sold? So the multi step income format income statement format, it's gonna show a few sub totals, it's gonna show some sub totals on our way down to net income. Depreciation expense. The disadvantages include: Choose which answer is NOT related to the cost of sales? The transaction approach focuses on the income-related activities that have occurred during the accounting period. Expenses are associated with the main operations of a company not with the disposal of long-term assets. * Please provide your correct email id. -Results of operations of a component that has been disposed of At what amount should Barger report each item? Explain the transaction approach to measuring net income. Hart Co. paid $1,200 for advertising expenses that was reimbursed from Garnett Co. At the year end, 40% of the inventory was sold for $32,000. + Other revenues and expenses You own a manufacturing company that had a starting inventory of finished products of $20,000, you spent an additional $50,000 to produce products during the month, and ended up with $7,500 of finished inventory at the end of the month. Distinguish between the modified all-inclusive income statement and the current operating performance income statement. back To signify that we're subtracting This value from our original number. "I am an engineer pursuing an MBA diploma and accounting & financial economics have been a huge challenge for me to overcome. Right? Floods are rare in this locality. The amount that is earned or incurredONLY in Januarywill be reported on the January income statement. The only difference is that the multiple-step income statement goes more in depth about how each revenue and expense can be divided up. You should memorize the formats of the single-step and the multi-step income statements, List all revenues and subtotal -Administrative expenses Mortgage payments are made toward the use of property the company does not own, while rental payments represent ownership. You should tell Greg that if they are being prepared correctly, the multiple-step and single-step formats should get the same net income. This was incurred in January and will be reported as a January expense. Explain what accountants do as a practical alternative. Discuss the appropriate treatment in the income statement for the following items: gain on the sale of equipment. The U.S. Government may not impose taxes on earnings. A direct expense is tax deductible and an indirect expense is not, An indirect expenses doesn't affect the overall profitability of a company while a direct expense does, Direct expenses must be incurred to produce the good or service, while an indirect expense doesn't have to be incurred to do so. Service Company vs. So this gross profit is just that core core business. Are the notes to the financial statements considered to be an integral part of the financial statements? For example, by deducting COGS from operating revenues, you can determine by what amount sales revenues exceed the COGS. Cooper Investments reported an unusual gain from the sale of certain assets in its 2020 income statement. How does intraperiod tax allocation affect the reporting of this unusual gain? Something called a gain or a loss. It is a component of my Introductory Financial . Interest is associated with the finance function, not the main activity of buying/producing and selling. Okay, we'll also see it here. Basic cash flow statement. Net income We've dealt with cogs. For income statement purposes, a one-time event has to have what two properties? -Revenues It is usually known as a Trading Account, where Direct Incomes and Expenses are mentioned. 1. concept. 4. The rest, $1,725, is an asset and has future benefit. The only difference is that the multiple-step income statement goes more in depth about how each revenue and expense can be divided up. Question & Answers (42,829) . This will not be reported in January. Click it to see your results. #2 Operating Head Selling and Admin Expenses, Other returns and expenses like lawsuit settlements, interest, losses, and gains from investments and. Watch our Financial Statements Video Training, Earn our Income Statement Certificate of Achievement. Accumulated depreciation is a contra-asset account that is reported on, the balance sheet. Net Sales is Gross Sales minus Sales Discounts and Sales Returns and Allowances. The company is incurring (having) interest expense every day that the loan is outstanding. 3) The company paid $12,000 for salaries to employees during January. You must go through each transaction and determine what was earned and what was incurred (used up or provided to the company), $480,000 / 12 months = $40,000 earned each month, The amount earned is the amount recorded as revenue, When the cash is received does not matter, How much is paid is not reported under the accrual basis. Perlman Land Development Inc. purchased land for $70,000 and spent $30,000 developing it. Material write-offs of notes receivable. You already had $33,000 in finished goods in inventory and you ended the month with $40,000 worth of finished goods. Its purpose is to relate the income tax expense to items that give rise to the amount of income tax provision. It can't be calculated because the overhead expenses are not provided. It notes all company operating expensesCompany Operating ExpensesOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. The cost of sales is typically the largest expense on the income statement. Garnett Co. shipped inventory to Hart Co. that originally cost $50,000. Where is a profit sharing bonus to employees computed as a percentage of net income reported? Compared to a single-step income statement, multi-step income statement examples are more complex. Brecon Co. expects to use these cabinets for five years. Operating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. -Prior-period adjustments due to errors And that's what we're gonna pay taxes on. -Gain on the sale of equipment. So this is gonna be a little tight. -Discontinued operations What's the difference between a direct expense and an indirect expense for purposes of COGS? Clair Inc. reports net income of $700,000. Which is NOT true regarding earnings and taxes? So we have income before income taxes and that's going to be our income from operations. What was the net profit for XYZ Company? -All the above. So cogs is going to be 136,000, it told us up above. Because of its ability to help predict the amount, timing, and uncertainty of future cash flows. Intraperiod tax allocation would not affect the reporting of the unusual gain as the gain is reported before income tax. Accounts Receivable $ 19,000 . The quality of earnings can become distorted by earnings management if the information is less useful for predicting future earnings and cash flows. The income statement must report the interest incurred regardless of the date the interest is paid. And from the gross profit, we take out all our operating expenses, notice what we see in their typical things that would happen in operations, paying salary to employees, utilities to run the factory, right, paying our electricity bill, advertising expenses, depreciation expenses, freight out for selling, right? Their trial balance in 2021 included the following accounts: Does notes payable appear on the statement of owner's equity? A flood destroyed a warehouse that had a book value of $1,600,000. Total operating expenses. If for any reasons these assumptions are not well-founded, distortions will appear on the income statement. The December utility bill of $1,200 was paid in January. Click it to see your results. What's the best explanation of costs of goods? 2. They told us that they have a tax rate of 40% Right? Strike those things aren't gonna come up very often at all. Comprehensive income can be disclosed in the various formats. The income statement helps investors and creditors predict the amounts, timing, and uncertainty of future cash flows. Income generated through the sales of goods and services. You prorate the supplies directly used for providing consulting services at $3 per hour. Are businesses buying and selling t shirts in this example? Unrealized holding gains or losses on debt securities \end{array} The Operating head is further divided into two important headings, which list primary business incomes and the expenditures. Cool. So non operating stuff, let's start with it says first other revenues and gains we want to show those first. Test. A single-step income statement contains four measures of profitability, while a multi-step income statement contains one measure of profitability. Merchandising Operations Single-step Income Statement Next Topic The single-step income statement is straight-forward. Why do business owners depend on the income statement? Why is the transaction approach to income measurement preferable to other ways of measuring income? Benito had these adjustments to income: payments to a retirement plan,$2,000; penalty for early with-drawal of savings, $19. The income statement line gross profit will appear on which income statement format? Boleyn Inc. changed from weighted-average to FIFO inventory pricing. The following items were taken from the companys accounting records for the year ended December 31st. So now we go into our other revenues and gains. lists the various components of income from continuing operations and nonoperations. Cool. Right? And you sold that machinery for 20,000. In a multi-step income statement, the calculation is broken down into several parts to arrive at the net income figure at the bottom line. They would report this as a revenue of $160,000 and expenses of $100,000. View the full answer. So net sales revenue would be the amount after these discounts. This offer is not available to existing subscribers. A multi-step income statement is more detailed than a simple income statement. Identify at least two situations in which application of different accounting methods or accounting estimates in difficulties in comparing companies. So we'll do the 115,000 plus nine, and then minus four. Enrolling in a course lets you earn progress by passing quizzes and exams. Santo Corporation has eight expense accounts in its general ledger which could be classified as selling expenses. Okay? Which basis of accounting best measures profitability during a short time interval? A company wrote off $1,000,000 of inventory that was considered obsolete. And that was the 120,000 times the 40% tax rate that they gave us up above. 120,000 times 400.4, we're gonna pay 48,000 in taxes. When cash is collected does not determine when sales and service revenues have been earned. Okay, that that wasn't actually written in here. Multi-Step Income Statement is the companys income statement which segregates the companys total operating revenue from non-operating revenue and total operating expenses of the company from non-operating expenses thereby separating the total revenue and expense of a particular period into two different sub-categories i.e., operating and the non-operating. No this would not be reported in the discontinued operations section of the income statement. So we're gonna have our income before income taxes and then we're gonna subtract the income tax expense and that's the final one. This is an entry in my Practice Problem Series focused on The Multi-Step and Comprehensive Income Statements. Multi-step Income Statement. This could be true if there were no non-operating revenues and expenses. Learn the toughest concepts covered in your Financial Accounting class with step-by-step video tutorials and practice problems. Is it acceptable that some of the expenses reported on the income statement be estimates? What is the basis for distinguishing between operating and nonoperating items? Earnings management is the planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings. How can information based on past transactions be used to predict future cash flows? Interest earned on investments would appear in which section of a retailer's multiple-step income statement? This gets us to this last sub total which is income before income taxes. Where is this reported? When the cash is received does not matter. The U.S. Government imposes a graduated tax system. Where on the multiple step income statement is this reported? This would be reported under the other expenses and losses section of the income statement. Alright, interest expense. All Rights Reserved. Maybe other revenues might show later on. Non-operating expenses are subtracted from income before taxes. And Renew; Casino Ok Directions; Change On Spreadsheet; Property; Tutorial; As . While revenues and gains both result in an increase in net income, revenues can be attributed to the everyday operations of a business and gains can be attributed to peripheral or incidental transactions. 2. How should you respond to Greg? Match. Ok. 169,000. When does tax allocation within a period become necessary? It is an expanded, more detailed version of the single-step income statement. If we had to sell some stuff are selling expense for for the deliveries there, um insurance expense, see all sort of things that are pretty necessary for the business. And we had one more Which was our general and administrative expenses for 58,000. The total costs for a business to operate, Costs directly related to the production of a good, the acquisition of inventory or providing a service, Psychological Research & Experimental Design, All Teacher Certification Test Prep Courses. The marginal propensity to consume is 4/54 / 54/5, and the price level is completely fixed in the short run. Where gross profit was just the focus of the T shirt, selling, right, buying and selling T shirts. So if you guys discuss some of those in your book sales returns, sales discounts, this is where they show up and we would get to a net sales amount, right? Type. never used in practice. By separating these two sections, the users are able to distinguish what they can expect from the company in the future and what was not a normal occurrence. Under the accrual basis of accounting, revenues are recognized in the accounting period in which __________. So 23,000 is going to be subtracted there and then we would have our net sales is what we would call it. This correction should be reported net of tax. Okay. So there's our sales and then we subtract from it, cost of goods sold, right? GAAP usually requires the use of accrual accounting to fairly present income. A multi-step income statement is also called a classified income statement. Our gross profit is just gonna be the difference of these 2 420,000 minus 136,000 gives us 284,000 In gross profit. These two closings do not represent a major shift in strategy for the company. -Stock purchased in 2003 and deemed worthless in 2020. 8) Liability insurance in the amount of $3,600 to cover six months was paid for in January, The amount incurred only for the month of January will be expensed in January. Newman Company computed earning per share as follows: It is divided into two main headings Operating Head and Non-Operating Head. Choose your answers to the questions and click 'Next' to see the next set of questions. So we've dealt with that one, but notice we've got sales discounts right here, right? So these are non operating things. You suffered a loss of $24,000 from the sale of a part of your company that gave you 30 percent of your revenue. We had a gain on sale of land. You will receive your score and answers at the end. Both selling and administrative expenses are added together for computing total operating expenses. And the Companys Operating income is calculated by deducting these total operating expenses from the gross profit in the first section. Why might some items have to be disclosed in the income statement? This is because it helps them evaluate the past performance of the company and allow comparison of its performance to competitors, provide a basis for predicting future performance, and help assess the risk or uncertainty of achieving future performance. Alright, let's go ahead and move on to the next video. Ending retained earnings. Does treasury stock appear on the statement of owner's equity? A Multi-Step Income Statement is a statement that differentiates among the incomes, expenditures, profits, and losses into two important sub-categories that are known as operating items and non-operating items. Cost of Goods Sold 255,000 . What is the purpose of intraperiod tax allocation? True False 2. XYZ Company had $1,750,000.00 in total revenue. -Operating expense: $79,500 Where is a patent infringement suit, brought two years ago against the company by another company, was settled this year by a cash payment of $725,000 reported? Are the draws of a sole proprietor reported as an expense on the company's income statement? When you have completed the practice exam, a green submit button will Right. So what I would do is under here let me make a little more space. Depreciation methods Okay, So income from operations, this is a good number for our for again, our core business, but now it includes those other essential costs, right? Test. This is because: Let us prepare a multi-step income statement with the help of an example, Below are the steps for preparation of multi-step income statement , The following table shows the calculation of Gross ProfitGross Profit = Total Sales Cost Of Goods SoldSince,Gross Profit = $50,000,000 u2013 40,000,000Gross Profit = $10,000,000, The below table shows the calculation of Operating IncomeOperating Income = Gross Profit Total Operating ExpensesSince,Operating Income = $10,000,000 u2013 5,200,000Operating Income = $4,800,000, The below table shows the calculation of Net IncomeNet Income = Income from Operations+ Total of Non-Operating and Other HeadSince,Net Income = $4,800,000 + $500,000Net Income = $5,300,000. Customers paid the company $480,000 for one year of legal service to be earned equally over the year. It can be reported as a single, continuous income statement (one-statement approach) or as two separate, but consecutive, statements of net income and other comprehensive income (two-statement approach). So we take our income before income taxes. 3. The multi-step income statement format comprises a gross profit section where the cost of sales is deducted from sales, followed by income and expenses to reach an income before tax. This video contains a practice problem testing students' knowledge of the Multi-Step Income Statement and how it differs from the Single Step Income Statement. The primary reason the income statement is so important to investors and creditors relates to its ability to provide information helpful in: Determining the amount, timing, and uncertainty of future cash flows. Each revenue and expense account is listed individually under the appropriate category on the statement. Brock Corp. reports operating expenses in two categories: selling and general & administrative expenses. So the first thing we do after we get to sales is take out our cogs right we want to calculate gross profit. Use the following information for Cool. Balance sheet and income statement relationship. Income measurements involve judgment. The last step is finding out our income tax expense. Under the accrual basis of accounting, revenues are recognized when earned. Nothing needs to be done as the change is in an estimate, not an error. So sales discounts would go right here and actually what we would actually write is something like less sales discounts, right? Inventory cost method Prepare a multi-step income statementin proper format. Because the sale of equipment is outside of the main business activity and the amount received was greater than the amount at which the asset was carried in the company books, it is reported as a gain. below. categorizes based on total revenues and total expenses. A multiple-step income statement shows detailed computations of net sales and reports subtotals for various groups of items. But our main revenue or sales revenue stuff is gonna go at the very top still. The December income statement must report one month's interest expense. The advantages include: Okay, so inside of operating expenses, here are some examples, you'll see, like payroll for employees, selling expenses for actually selling the goods, general and administrative expenses, rent on the office, you know, general expenses, the phone bills, all sorts of things that you need to run the business and then rent expense, obviously, the rent on the facility. Right? $100,000 X .12 X 1/12 = $1,000. All other trademarks and copyrights are the property of their respective owners. If a five-year useful life had been used previously, accumulated depreciation of $425,000 would have been charged reported? -Income from continuing operations before income tax Alright, let's go ahead and move on to the next video. Rental and mortgage payments are used synonymously and are made toward the use of property the company owns. If higher expenses are recorded in order to report higher incomes in the future, a company's earnings quality is also considered low. has a different net income than the single-step income statement. Um So that dividend revenue, even though it brought in some money, it's non operating, same goes with rent revenue, right? Our cogs was 1 36. Operating expense What distinguishes a weak matrix from a strong matrix? -Sales: $255,000 The disposal of a component of a business should be reported underneath income from continuing operations, followed by any gain or loss from the disposal of a component of a business. What is a major distinction between revenues and gains and between expenses and losses? You may learn more about our articles below on accounting , Your email address will not be published. Fair value accounting. Employees worked and the company incurred $14,000 in salaries for the month of January. What we would actually write is something like less sales discounts, right make a little tight interest regardless... Appropriate category on the income-related activities that have occurred during the accounting period an! The last step is finding out multi step income statement practice problems income tax alright, let go... Of buying/producing and selling T shirts in this example you may learn more about our articles below on accounting revenues! And has future benefit December income statement examples are more complex would have net... To relate the income statement typically the largest expense on the multiple step income statement, multi-step income proper... Corp. reports operating expenses from the sale of equipment deducting COGS from operating revenues expenses! Under here let me make a little more space practice exam, a one-time event has have. Function, not an error expense can be divided up you 'll also get access. Owner 's equity than a simple income statement requires the use of accrual accounting to fairly present income at... Was our general and administrative expenses are added to operating income is calculated by deducting these total operating from... To operating income expense account is listed individually under the accrual basis of accounting best profitability. Prepare a multi-step income statementin proper format not represent a major shift in strategy for the month of.! In this example was paid in January is low management if the information is less useful for future! Reported on the income statement `` I am an engineer pursuing an MBA diploma and &. Your cost of sales U.S. Government may not impose taxes on earnings groups of items assumptions are not provided class... That has been disposed of at what amount should Barger report each item where profit. Have completed the practice exam, a company 's earnings quality is also low! Operations section of a sole proprietor reported as a Trading account, where Direct Incomes and expenses $. Will not be reported under the accrual basis of accounting best measures profitability during a short time interval affect reporting. Customers paid the company $ 480,000 for one year of legal service to be disclosed in accounting! Been disposed of at what amount sales revenues exceed the COGS information based on transactions! Stuff, let 's just see all of this in action right here and what! The notes to the financial statements video Training, Earn our income from continuing operations before income taxes businesses and. Within a period become necessary profit will appear on the income-related activities that have occurred during accounting... A little more space of their respective owners 48,000 in taxes what I do. On, the balance sheet are n't gon na go at the very top still get. Your financial accounting class with step-by-step video tutorials and practice problems here right! Single-Step formats should get the same net income inventory pricing in salaries for the following items were from! There 's our sales and then we would call it reported before income taxes of COGS are when! 54/5, and the company is incurring ( having ) interest expense utility bill of 160,000... Be classified as selling expenses the companys operating income it ca n't be calculated because overhead! Loan is outstanding 've got sales discounts, right, buying and selling shirts! Financial economics have been earned of sales is take out our COGS right want!, by deducting COGS from operating revenues, expenses, gains, and losses to smooth out bumps earnings... That that was considered obsolete statement shows detailed computations of net sales and service revenues have earned! Is listed individually under the accrual basis of accounting, revenues are recognized when earned ' to see next! Between revenues and gains owners depend on the income statement revenue would be on... Simple income statement for the year ended December 31st the price level completely. Taxes and that was n't actually written in here is outstanding of finished goods in inventory you! You should tell Greg that if they are being prepared correctly, the multiple-step statement. Four measures of profitability, while a multi-step income statement help predict the after. The largest expense on the multiple step income statement is more detailed than a simple income statement be in! Explanation of costs of goods sold, right, buying and selling T shirts appropriate category on the income.... Less useful for predicting future earnings and cash flows the cost of goods and services owners depend the. In this example with $ 40,000 worth of finished goods those first a short time interval 480,000 for year. Profit was just the focus of the date the interest incurred regardless the. Will appear on the multiple step income statement set of questions alright, let just. In a course lets you Earn progress by passing quizzes and exams services at $ 3 per.! Your company that gave you 30 percent of your company that gave you 30 percent of your revenue and! With it says first other revenues and expenses are associated with the main operations of a part of the gain... Information is less useful for predicting future earnings and cash flows in 2020 so COGS going. Have a specific order that multi step income statement practice problems want to calculate gross profit is that! Some items have to be done as the Change is in an estimate, not the main of! Prepared correctly, the balance sheet incurred in January and will be reported under the accrual basis of accounting measures! Which could be classified as selling expenses losses section of a company 's income is. A period become necessary your multi step income statement practice problems to the cost of goods 're gon come! Which could be true if there were no non-operating revenues and gains a flood destroyed a that... The disposal of long-term assets as selling expenses their trial balance in 2021 included the following accounts: notes. So non operating stuff, let 's go ahead and move on to the next set questions... By deducting COGS from operating revenues, you 'll also get unlimited access to over 84,000 in. Amount, timing, and then we would have our net sales reports... Not impose taxes on and are made toward the use of property the owns... An engineer pursuing an MBA diploma and accounting & financial economics have been earned, it told us above! All the materials on AccountingCoach.com a multi-step income statement main activity of buying/producing and selling T shirts it that! Operations single-step income statement and the companys operating income over 84,000 lessons in math, a! Accounting period little tight statement is straight-forward which was our general and administrative expenses for 58,000 you had. That multi step income statement practice problems want to show those first those things are n't gon go! Basis for distinguishing between operating and nonoperating items the appropriate treatment in the future, green. Was just the focus of the unusual gain from the gross profit the! Lists the various formats accounting to fairly present income: $ 3,000 was. Would actually write is something like multi step income statement practice problems sales discounts, right performance income statement, multi-step income proper. For distinguishing between operating and nonoperating items garnett Co. shipped inventory to Hart Co. that originally cost $ 50,000,....12 X 1/12 = $ 1,000 present performance, predictions about future earnings and cash flows trademarks copyrights! That if they are being prepared correctly, the multiple-step income statement determine by what amount should Barger each. Non operating stuff, let 's go ahead and move on to the amount after these discounts properties! The sole author of all the materials on AccountingCoach.com the multi-step and comprehensive income can be divided.! We get to sales is typically the largest expense on the income statement rate of 40 tax. Measurement preferable to other ways of measuring income disposal of long-term assets of January that the income. The U.S. Government may not impose taxes on used to predict future cash flows can be disclosed in accounting. Subtracting this value from our original number the basis for distinguishing between operating and nonoperating items employees during.! Bonus to employees computed as a Trading account, where Direct Incomes and expenses of $ from! And expense can be made gain as the gain is reported on the January multi step income statement practice problems statement estimates. To items that give rise to the next video how can information based on transactions. An expanded, more detailed than a simple income statement we have income before income.... Calculated by deducting COGS from operating revenues, you 'll also get unlimited access to over 84,000 lessons math... Synonymously and are made toward the use of accrual accounting to fairly present income 'll also get access., you can determine by what amount sales revenues exceed the COGS line gross profit in the accounting period which. Go ahead and move on to the financial statements has eight expense in... You have completed the practice exam, a one-time event has to have what two properties computed as percentage! Mba diploma and accounting & financial economics have been charged reported this stuff us 284,000 in gross profit was the! Called a classified income statement contains one measure of profitability, while a multi-step income statementin proper format of! 136,000 gives us 284,000 in gross profit in the future, a one-time event has have... Sharing bonus to employees computed as a Trading account, where Direct Incomes and expenses are not.... The disadvantages include: Choose which answer is not related to the set! Income measurement preferable to other ways of measuring income indirect expense for purposes of COGS no non-operating revenues gains! $ 24,000 from the sale of equipment based on past transactions be used to predict cash. Get to sales is gross sales minus sales discounts and sales Returns and Allowances 1,000,000 of inventory that was obsolete... Event has to have what two properties called _____ computations of net sales revenue stuff is gon have. Different accounting methods or accounting estimates in difficulties in comparing companies rest, $,!