《financial Accouning, 9e财务会计 Warren》ch14.pptVIP

Allocating Income Taxes 1. Revenues or gains are taxed after they are reported in the income statement. 2. Expenses or losses are deducted in determining taxable income after they are reported in the income statement. 3. Revenues or gains are taxed before they are reported on the income statement. 4. Expenses or losses are deducted in determining taxable income before they are reported in the income statement. Differences in tax law and GAAP create some temporary differences that reverse in later years. Temporary differences do not change or reduce the total amount of tax paid, they affect only the timing of when the taxes are paid. Temporary Differences Temporary Differences Comprehensive Income Stockholders’ equity: Common stock $ 20,000 $ 20,000 Paid-in capital in excess of par 36,000 36,000 Retained earnings 165,500 157,000 Accumulated other comprehensive income 1,290 1,200 Total stockholders’ equity $222,790 $214,200 Short-Term Investments in Stocks Business Combinations Business Combinations Mergers: Company A acquires company B. The assets and liabilities of B are transferred to A and B is then dissolved. A merger combines two corporations by one acquiring the properties of another that is then dissolved. Many businesses combine in order to produce more efficiently or to diversify product lines. A consolidation is the creation of a new corporation, to which the combined assets and liabilities of the old corporations are transferred to the new corporation. Mergers A B Consolidations: Company A acquires company B. The assets and liabilities of both A and B are transferred to a new company C and A and B are then dissolved. Consolidations C A B Extraordinary items result from events and transactions that 1 are significantly different from the typical or the normal operating activities of the business AND 2 occur infrequently. Extraordinary Items Jones CorporationIncome StatementFor the Year Ended December 31, 2006 Net sales $12,350,000 Income