business law case study

Case 2: Totz Income Statement Analysis Using FASB Codification 12 1. Net Sales ASC 225-10-S99-2 (1) in the codification indicates that net sales of tangible products (i.e. the clothing from the Totz stores) are stated separately from revenues that are earned from services (i.e. services from its in-store art studio Doodlez) but are both featured under the Sales section of the income statement. The specific regulation is as follows: "If income is derived from more than one of the subcaptions described under 210.5-03.1, each class which is not more than 10 percent of the sum of the items may be combined with another class. If these items are combined, related costs and expenses as described under 210.5-03.2 shall be combined in the same manner. 1. Net sales and gross revenues. State separately: (a) Net sales of tangible products (gross sales less discounts, returns and allowances), (b) operating revenues of public utilities or others; (c) income from rentals; (d) revenues from services; and (e) other revenues." Both sales from Totz and Doodlez are more than ten percent of the sum of the items, which means they must be separately stated on the income statement. My team and I discussed compiling a comparative income statement for the different years of information provided to us. This would be useful to be able to compare revenues from 2014, 2015, and 2016; however, Doodlez was only introduced in the third quarter of 2015. Therefore, to properly disclose the 13 dramatic change in Doodlez's revenue from 2015 to 2016 (an increase of $7.3 million), explanatory notes to the financial statements would be necessary. 2. Gross Profit Gross profit is its own line item on the income statement. However, it is not actually a "section" of the income statement, but it is an important part of the financial statement. According to the codification ASC 360-20-55-14, "gross profit is presented as a separate item of revenue on the income statement when it is recognized as earned." Gross profit is equal to net sales less cost of sales, which needs to be broken down into cost of tangible goods sold and cost of services and are stated separately according to the FASB codification. ASC 225-10-S99-2 (2) states, "2. Costs and expenses applicable to sales and revenues. State separately the amount of (a) cost of tangible goods sold, (b) operating expenses of public utilities or others, (c) expenses applicable to rental income, (d) cost of services, and (e) expenses applicable to other revenues. Merchandising organizations, both wholesale and retail, may include occupancy and buying costs under caption 2(a). Amounts of costs and expenses incurred from transactions with related parties shall be disclosed as required under 210.4-08(k)." This says that both cost of goods sold and cost of services must be recognized as two different line items under the sales section of the income 14 statement. Additionally, we are told that depreciation is excluded from cost of sales. Under ASC225-10-S99-8, the company cannot report a subtotal that excludes depreciation. Therefore, Totz should not report a gross profit subtotal because the excluded depreciation is attributable to cost of sales. ASC 225-20- S99-8, or SAB Topic 11, states the following: "The following is the text of SAB Topic 11.B, Depreciation and Depletion Excluded from Cost of Sales. Facts: Company B excludes depreciation and depletion from cost of sales in its income statement. Question: How should this exclusion be disclosed?

Question 6.

81. Which of the following is an example of ______ improvement?

82. Which of the following is an _____ to a business of a _____ maintenance program _____.

83. Which of the following _____ of personal appearance would likely have the least _____ effect in the workplace

84. Planning activities in____, setting priorities, and avoiding _____ diversions are important aspects of _____.

85. As you develop_____, the things you learn about yourself will help you to understand others. _____.

86. Employees who have _____ responsibilities for part or all of the _____ work in _____.

87. What is one of the main reasons for sending an interview follow-up letter?

88. Which of the following statements about working in the financial-services industry is false:

89. As an employee of a _____ firm, Elise helps her clients reduce their debt, build their____, and save for their retirement. Which certification is Elise mostly likely to need to perform her job:

90. Which of the following is a ______ sought by individuals who _____ companies and industries and make buy, sell, and hold recommendations for certain securities: