
Concept explainers
(a)
Income statement:
This is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time.
Generally Accepted Accounting Principle (GAAP):
Two generally accepted accounting principles that relates to adjusting the accounts are as follows:
- The revenue recognition principle
- The expenses recognition principle
The revenue recognition principle:
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
The expense recognition principle:
The expense recognition principle refers to the expenses that should match with revenue (matching principle) in the period when the company incurred expenses in order to generate the revenue.
To prepare: The correct income statement of Company LP for the quarter ended March 31, 2014.
(b)
To explain: The effects of GAAP principle which was not recognized at the time of preparing the income statement.

Want to see the full answer?
Check out a sample textbook solution
Chapter 4 Solutions
Financial Accounting
- KD Industries has 30 million shares outstanding with a market price of $20 per share and no debt. KD has had consistently stable earnings and pays a 35% tax rate. Management plans to borrow $200 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares. The present value of KD's interest tax shield is closest to a. $130 million b. $200 million c. $400 million d. $70 millionarrow_forwardCorrect answer please general accountingarrow_forwardTargeted pre tax income?arrow_forward
- Please provide the correct answer to this financial accounting problem using accurate calculations.arrow_forwardIf a country can give up one unit of future consumption and as result increase its current consumption by 0.94 units, its real rate of interest must be: (a) 1.4% (b) 3.4% (c) 6.4% (d) 9.4%arrow_forwardWhat is the total contribution margin??arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





