Question

1. One way of accessing financial information about a company is to look it up at the company's website. Access the most recent annual report of a company of your choice from the company's website and address the following points.

a. Review the company's footnotes (notes accompanying the financial statements) to discover how it applies the revenue recognition principle and when it recognizes revenue. Report what you discover.

b. Based on your observation of the financial statements, what amount should be credited to Income Summary to summarize its revenues earned?

c. Based on your observation of the financial statements, what amount should be debited to Income Summary to summarize its expenses incurred?

d. What is the balance of its Income Summary account before it's closed?

This is required as per US GAAP

Answer 1

Annual Report of Home Depot 2018 is selected

a. revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services.

b. Amount Credited to Income Summary A/c
Sales $108203 millions
Interest & Investment Income $93 millions
Total = $108296 millions

c. Amount debited to Income summary A/c
Cost of Sales $71043 millions
Selling, general and administrative $19513 million
Depreciation and amortization $1870 million
Impairment Loss $247 millions
Interest Expense $1051 millions
Other $16 millions
Provision for Income Tax $3435 millions
Total = $97175 millions

d.Credit Balance of Income Summary A/c before it is closed = $108296 - $97175 = $11121 millions