Lads & Lassies Essay

967 Words Nov 24th, 2012 4 Pages
Arthur Gharakhanian

Lads & Lassies (LL)

ACCU-620

Brandman University

Week 4, Assignment 2

November 14th, 2012

Lads & Lassies
Introduction
Classifying how the income statement needs to be coded for Lads & Lassies is a two step processes. I will be using the data provided in the case along with information from FASB's Accounting Standards Codification. FASB's coding system is being used to help prepare the layout and ensure proper reporting of the items listed in the case analysis. Some minor changes need to be done to the income statement format to make it presentable which will be noted in the analysis. Please reference Appendix A throughout the analysis to see how the income statement is ultimately being
…show more content…
When constructing the income statement we will have to address the gain on sale of corporate headquarters and the class action settlement. In accordance with ASC 225-20-45-4(d), " the sale or abandonment of property used in the business is being excluded from being presented as an extra-ordinary item" (FASB, 1973). However, when the gain or loss of a building is associated with the movement of corporate headquarters, we would use ACS 225-20-45-16 (Presentation of Unusual or Infrequently Occurring Items). This rule states that "a material event or transaction that is unusual in nature or occurs infrequently but not both, shall be reported as a separate component of income from continuing operations" (FASB, 1973). Rules ASC 225-20-45-4 & ASC 225-20-45-16 also address the presentation of the settlement received from the class action lawsuit. We must report the gain or loss from the class action lawsuit in other income (expense) section of the income statement. This section will follow the income and cost of goods sold sections, thereby "adding back" revenue to the gross profit to reveal a new gross profit. These transactions could be considered below the line entries and would follow indirect expenses (salaries, rent, etc.), but since those items are not present these entries will follow revenue and cost of goods sold.
Conclusion
Using FASB we are
Open Document