PowerPoint Slides
Three PowerPoint presentations of the chapter are available in the Connect
Library:
1. With “Concept Checks” useful for classroom presentation, permitting the
instructor to intersperse in the presentation short exercises students can be
asked to solve individually or in small groups before the solution is
“revealed” by the instructor. {These are available only within Instructor
Resources.}
2. Without the “Concept Checks” so students don’t have the solutions before
being asked to solve individually or in small groups.
3. Accessible PowerPoint Presentations. Accessibility is becoming even
more important in the education marketplace. Students and instructors with
disabilities use many different assistive technologies, and McGraw-Hill
Education is working to increase compatibility and access that will not only
help those with disabilities achieve better learning outcomes, but also serve
the institutions that are teaching these students. Accessible PowerPoint
allows slide content to be read by a screen reader and provides alternative
text descriptions for any image files used that enrich the learning experience.
Accessible PowerPoint is also designed with high-contrast color palettes and
uses texture when possible, instead of color to denote different aspects of the
imagery used within the slide.
Note: The slides are intended to provide comprehensive coverage of the chapter,
but they can be easily edited to allow instructors to change numbers
and content in illustrations or to delete slides pertaining to topics they
choose to omit or deemphasize. (Using your students’ names for company
names in the Concept Checks or Illustrations can be fun.)
Suggestions for Class Activities
1. Research Activity
Darden Restaurants reported discontinued operations in its income statements for its 2015, 2014,
and 2013 fiscal years.
Suggestions:
Have the class access the company’s financial statements for the fiscal year ended May 31,
2015, using EDGAR, which can be located at www.sec.gov. Ask them to answer the following
questions:
1. What segments of the company were sold?
2. What was the gain/loss on sale of assets included in discontinued operations?
3. What was the net-of-tax income (loss) from discontinued operations reported for each of
the three years?
2. Target Analysis
Have students, individually or in groups, go to the most recent PetSmart annual report using
EDGAR, which can be located at www.sec.gov. Ask them to:
1. Compare the revenues, operating expenses, net income, and net income as a percentage of
revenue dollars with those in the 2016 annual report found in Appendix B of the text. Are
there any discernible trends? How might they be interpreted?
2. Does the income statement distinguish between operating and nonoperating items?
3. Is income tax expense reported separately? How is income from discontinued operations, if
any, reported?
4. Compare cash flows from operating, investing, and financing activities with those in the
2016 report. Are there any discernible trends? How might they be interpreted?
3. Professional Skills Development Activities
The following are suggested assignments from the end-of-chapter material that will help your
students develop their communication, research, analysis, and judgment skills.
Communication Skills. Integrating Case 4–12 can be adapted to ask students to answer the
requirement in the form of a formal report. Analysis Case 4–13 does well as a group
assignment. Judgment Case 4-1 creates good class discussions. Real World Cases 4–4 and
4–14 and Research Case 4-11 are suitable for student presentation(s).
Research Skills. In their careers, our graduates will be required to locate and extract relevant
information from available resource material to determine the correct accounting practice,
perhaps identifying the appropriate authoritative literature to support a decision. Research
Case 4–5 and Exercises 4–22 and 4–23 provide excellent opportunities to help students
develop this skill. In addition, Real World Case 4–4 can be adapted to require students to
research the authoritative literature on the presentation of non-GAAP earnings.
Analysis Skills. The “Broaden Your Perspective” section includes Analysis Cases that direct
students to gather, assemble, organize, process, or interpret data to provide options for
making business and investment decisions. In addition to Analysis Case 4–13, Judgment
Cases 4–6 and 4–7 also provide opportunities to develop and sharpen analytical skills.
Judgment Skills. The “Broaden Your Perspective” section includes Judgment Cases that
require students to critically analyze issues to apply concepts learned to business situations
in order to evaluate options for decision making and provide an appropriate conclusion.
Assignment Chart
Learning Est.
time
Questions Objective(s) Topic
(min.)
4–1 1 Purpose of the income statement 5
4–2 1 Income from continuing operations 5
4–3 1 Operating and nonoperating income 5
4–4 1 Single-step and multiple-step income statements 5
4–5 2 Earnings quality 5
4–6 3 Restructuring costs 5
4–7 4 Intraperiod tax allocation 5
4–8 4 Discontinued operations 5
4–9 5 Change in accounting principle 5
4–10 5 Change in accounting estimate 5
4–11 5 Correction of errors 5
4–12 5 Earnings per share 5
4–13 6 Comprehensive income 5
4–14 7 Purpose of the statement of cash flows 5
4–15 8 Classification of cash flows 5
4–16 8 Noncash investing and financing activities 5
4–17 8 Direct method versus indirect method 5
4–18 9 IFRS; statement of cash flows 5
4–19 10 Activity ratios 5
4–20 10 Profitability ratios 5
4–21 10 DuPont framework 5
4–22 A Interim reporting [Based on Appendix] 5
4–23 A,9 IFRS; interim reporting [Based on Appendix] 5
Brief Learning Est.
time
Exercises Objective(s) Topic
(min.)
4–1 1 Single-step income statement 10
4–2 1,3 Multiple-step income statement 10
4–3 1,3 Multiple-step income statement 15
4–4 1,3 Multiple-step income statement 15
4–5 3,5 Income from continuing operations 15
4–6 4 Discontinued operations
4–7 4 Discontinued operations 10
4–8 4 Discontinued operations 10
4–9 4 Discontinued operations 10
4–10 6 Comprehensive income 10
4–11 8 Statement of cash flows; direct method 15
4–12 8 Statement of cash flows; investing and financing
activities
15
4–13 8 Statement of cash flows; indirect method 10
4–14 8,9 IFRS; statement of cash flows 10
4–15 10 Receivables and inventory turnover ratios 10
4–16 10 Profitability ratios 10
4–17 10 Profitability ratios 15
4–18 10 Inventory turnover ratio 5
Learning Est.
time
Exercises Objective(s) Topic
(min.)
4–1 1 Operating versus nonoperating income 20
4–2 1,5 Income statement format; single step and
multiple step
20
4–3 1,3,5 Income statement format; single step and
multiple step
20
4–4 1,5,6 Multiple-step continuous statement of
comprehensive income
20
4–5 1,5 Income statement presentation 20
4–6 4,5 Discontinued operations 15
4–7 1,3,4 Income statement presentation; discontinued
operations; restructuring costs
20
4–8 4 Discontinued operations; disposal in subsequent
year
15
4–9 4 Discontinued operations; disposal in subsequent
year; solving for unknown
10
4–10 5 Earnings per share 10
4–11 6 Comprehensive income 20
4–12 8 Statement of cash flows; classifications 10
4–13 8 Statement of cash flows preparation 15
4–14 8,9 IFRS; statement of cash flows 5
4–15 8 Indirect method; reconciliation of net income to
net cash flows from operating activities
15
4–16 8 Statement of cash flows; directly from
transactions
20
4–17 8 Statement of cash flows; indirect method 20
4–18 8 Statement of cash flows; indirect method 30
4–19 8,9 IFRS; statement of cash flows 30
4–20 8 Statement of cash flows; indirect method 30
4–21 8 Statement of cash flows; direct method 25
4–22 5 FASB codification research 15
4–23 5,6,8 FASB codification research 15
4–24 1–8 Concepts; terminology 15
4–25 10 Inventory turnover; calculation and evaluation 10
4–26 10 Evaluating efficiency of asset management 10
4–27 10 Profitability ratios 10
4–28 10 DuPont analysis 10
4–29 A Interim financial statements; income tax expense
[Based on Appendix]
15
4–30 A Interim reporting; recognizing expenses [Based
on Appendix]
15
4–31 A Interim financial statements; reporting expenses
[Based on Appendix]
15
4–32 A Interim financial statements [Based on Appendix] 15
Learning Est.
time
Problems Objective(s) Topic
(min.)
4-1 1,3,4,5 Comparative income statements; multiple-step
format
25
4-2 4 Discontinued operations 25
4-3 4,5 Income statement presentation; discontinued
operations; accounting error
20
4-4 3,4,5 Restructuring costs; discontinued operations;
accounting error
4-5 1,3,4,5 Income statement presentation; restructuring
costs; discontinued operations; accounting error
10
4-6 1,3,4,5 Income statement presentation; discontinued
operations; EPS
25
4-7 1,3,4,5,6 Income statement presentation; statement of
comprehensive income; unusual items
30
4-8 1,3,5,6 Multiple-step statement of income and
comprehensive income
30
4-9 8 Statement of cash flows 25
4-10 8 Integration of financial statements; Chapters 3
and 4
40
4-11 8 Statement of cash flows; indirect method 30
4-12 10 Calculating activity and profitability ratios 20
4-13 10 Use of ratios to compare two companies in the
same industry
40
4-14 10 Creating a balance sheet from ratios; Chapters 3
and 4
50
4-15 10 Compare two companies in the same industry;
Chapters 3 and 4
40
4-16 A Interim financial reporting [Based on Appendix] 30
Star Problems
Learning Est.
time
Cases Objective(s) Topic
(min.)
Judgment Case 4–1 2,3 Earnings quality 15
Judgment Case 4–2 3 Restructuring costs 15
Judgment Case 4–3 2,3 Earnings management 15
Real World Case 4–4 3 Earnings quality and non-GAAP earnings 15
Research Case 4–5 2,3 FASB codification; locate and extract relevant
information and cite authoritative support for a
financial reporting issue; restructuring costs; exit
or disposal cost obligations
40
Judgment Case 4–6 3,4,5 Income statement presentation 20
Judgment Case 4–7 3,4,5 Income statement presentation 20
IFRS Case 4–8 8,9 Statement of cash flows; GlaxoSmithKline Plc. 15
Judgment Case 4–9 3,4,5,6 Income statement presentation; unusual items;
comprehensive income
20
Judgment Case 4–10 2 Management incentives for change 15
Research Case 4–11 3 Non-GAAP earnings 60
Integrating Case 4–12 3 Balance sheet and income statement; Chapters 3
and 4
35
Analysis Case 4–13 1 Income statement information; Sherwin Williams 10
Real World Case 4–14 1,3,4 Income statement information 45
Real World Case 4–15 1,3,5,6,8 Income statement format; restructuring costs;
earnings per share; comprehensive income;
statement of cash flows; Ralph Lauren
45
Analysis Case 4–16 10 Evaluating profitability and asset management;
obtain and compare annual reports from
companies in the same industry
Judgment Case 4–17 10 Relationships among ratios; Chapters 3 and 4
Integrating Case 4–18 10 Using ratios to test reasonableness of data;
Chapters 3 and 4
Target Case 3,4,6,8 Income statement classifications; comprehensive
income, statement of cash flows; Target
Air France–KLM Case 9 IFRS; income statement classifications;
statement of cash flows; Air France–KLM 15