Financial Reporting of Net Losses and Retained Earnings

question 65

Essay

Financial reporting of net losses and retained earnings
A recent annual report of Dobbs,Inc. ,reported a net loss of approximately $63 million and retained earnings of approximately $1.6 billion.
(a)Which financial statement shows computation of the $63 million net loss?
(b)Which financial statement includes the retained earnings figure of $1.6 billion?
(c)Explain how it is possible for Dobbs to report both a net loss of $63 million and retained earnings of $1.6 billion in a single set of financial statements.

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Definitions:

Equity-Method Investments

An accounting treatment for investments in which the investor has significant influence over the investee, typically between 20% and 50% ownership, requiring the investor to include its share of the investee's income.

Trading Security

A financial instrument held by a firm primarily for the purpose of selling it in the short term for profit.

Available-for-sale Security

Financial securities that are not classified as held-for-trading or held-to-maturity, and thus can be sold in the market.

Accounting

The systematic process of recording, summarizing, analyzing, and reporting financial transactions of a business or individual.