Classification and interpr4eting income statements SeaBreeze Inc., a Taiwan-based semiconductor manufacturer, reported the following information for 2008.
Question:
Further information available to you reals the following five items (all financial figures reported in millions of Yuan).
a. During 2008 Sea Breeze had ¥$10,000 in gains on sales of assets. The firm included the gains as part of Revenues.
b. SeaBreeze included financial income of ¥$25,800 as part of Revenues, and financial expenses of ¥$12,000 as part of Cost of Sales.
c. The firm included a ¥$6,000 write-down of inventory in Selling. General, and Administrative Expenses Normally in this industry, such a write-down is included in Cost of Sales.
d. The firm included research and development expenditures of ¥$34,000 in Cost of Sales. None of the expenditures related to proven technologies (and so were correctly not capitalized.
e. During 2008 the firm committed to a plan to discontinue part of its operations. The discontinued operations accounted for ¥$22,000 of gross profit.
Evaluate the way SeaBreeze classified each of the five items on its income statement. If u disagree with the classification, state your reasoning and determine the effect on the firms gross margin and net income from the alternative classification that you wouldrecommend.
Step by Step Answer:
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis