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Ebook Principles of accounting (10E): Part 2

(BQ) Part 2 book "Principles of accounting" has contents: The Statement of cash flows, cost concepts and cost allocation, financial performance measurement, analysis for decision making, standard costing and variance analysis, performance management and evaluation, the budgeting process, the budgeting process,.and other contents. | C 14 H A P T E R The Corporate Income Statement and the Statement of Stockholders’ Equity A s we pointed out in an earlier chapter, earnings management—the practice of manipulating revenues and expenses to achieve a spe- cific outcome—is unethical when companies use it to create misleading financial statements. Users of financial statements consider the possibility of earnings management by assessing the quality, or sustainability, of a company’s earnings. To do so, they evaluate how the components of the company’s income statement affect earnings. In this chapter, we focus on those components. We also cover earnings per share, the statement of stockholders’ equity, stock dividends and stock splits, and book value per share. LEARNING OBJECTIVES Mak ing a Statement LO1 Define quality of earnings, and identify the components of a corporate income statement. LO2 Show the relationships among income taxes expense, deferred income taxes, and net of taxes. Balance Sheet LO3 Describe the disclosure on the income statement of discontinued operations and extraordinary items. Statement of Cash Flows Income Statement The corporate income statement aids in the analysis of profitability and links to stockholders’ equity, a component of the balance sheet. 638 Openmirrors.com LO4 Compute earnings per share. LO5 Define comprehensive income, and describe the statement of stockholders’ equity. LO6 Account for stock dividends and stock splits. LO7 Calculate book value per share. DECISION POINT A USER’S FOCUS ● What items other than normal operating activities contributed to Motorola’s performance? ● What does the company’s income statement indicate about its quality of earnings? ● MOTOROLA, INC. How does one put the various measures of performance (some of which are shown in Motorola’s financial highlights) in perspective? Motorola, a well-known maker of cell phones and other telecommunications equipment, has had its ups and downs in recent years. As shown .