3rd Edition

ISBN: 9780136946601

Author: GORDON

Publisher: PEARSON

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A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budge…

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Textbook Question

Chapter 5, Problem 5.3BE

Advantages and Disadvantages of the Income Statement. Match the item with the advantages and disadvantages of the income statements.

Item	Advantage/Disadvantage
1. Evaluates past performance.	a. The sale of a specialized piece of equipment is unlikely to reoccur in the following year
2. Predicts future performance.
3. Assesses risks or uncertainties of achieving	b. The income statements provide confirmatory value
future cash flows	c. Managers make estimates and assumptions
4. Excludes certain items.	d. Investors expect past growth to continue.
5. Depends on accounting methods selected.	e Managers manage earnings to meet analysts’ forecasts
6. Can be manipulated and managed.	f. Pending lawsuits may not be reported
7. Requires extensive judgment.	g. Managers can choose from several inventory cost flow assumptions.

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Chapter 5, Problem 5.2BE

Chapter 5, Problem 5.4BE

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Chapter 5 Solutions

INTERMEDIATE ACCOUNTING-MYLAB W/ETEXT

Ch. 5 - What are the three limitations of the income...Ch. 5 - In what way is the income statement useful for...Ch. 5 - Prob. 5.3Q Ch. 5 - Prob. 5.4Q Ch. 5 - What management behavior does the term earnings...Ch. 5 - What is the difference between permanent and...Ch. 5 - Prob. 5.7Q Ch. 5 - Prob. 5.8Q Ch. 5 - Prob. 5.9Q Ch. 5 - Prob. 5.10Q

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Solution Summary: The author explains the advantages and disadvantages of the income statement.

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