Exam 12: Interim Reporting and Disclosures About Segments of an Enterprise

With regard to major customers, which of the following items is not true?

Good Time, Inc. is a worldwide manufacturer of toys and games. In accordance with generally accepted accounting principles, quarterly statements are prepared. At the end of the first quarter of 20X2, the following data have been collected from the financial records: a. Sales were $14,680,000. b. Expenses related directly to the sales were $10,600,000, of which $9,500,000 related to the cost of goods sold. c. Good Time, Inc. employs the LIFO method for inventory valuation and has liquidated a portion of its beginning inventory. The liquidation was in the amount of $600,000, which is included in the cost of goods sold of $9,500,000, and the cost to replace this inventory will be $1,400,000. d. Other transactions during the first quarter were as follows: (1) Research and development costs were incurred in the amount of $4,000,000 and are expected to benefit equally the next 3 years. (2) Advertising costs were $75,000, of which one-third related to the first-quarter sales. (3) There was a gain on the early extinguishment of debt in the amount of $1,115,000. Assume that Good Time, Inc. had 500,000 shares of common stock outstanding throughout the first quarter. Required: In good form, present the quarterly income statement of Good Time, Inc. (assume an effective income tax rate of 40%).

Scenario 12-1 Ansfield, Inc. has several potentially reportable segments. The following financial information has been determined for the current fiscal year: Consolidated net income \ 1,000,000 Operating income before taxes 1,500,000 Net operating income of all segments 1,350,000 Total consolidated revenue 8,000,000 Total revenue of all segments, excluding intersegments sales 7,000,000 Total intersegment sales 1,200,000 Consolidated total assets 50,000,000 Total assets of all segments 45,000,000 -Refer to Scenario 12-1. The minimum amount of profit or loss a segment must have to qualify as reported is ____.

Which of the following best describes the treatment given a change in accounting principles made during the second quarter?

Which of the following items should be disclosed with interim data?

In determining whether a segment should be reported, a profit and loss test can be used. The test selects segments for reporting by:

East Company, a highly diversified corporation, reports the results of operations quarterly. At the beginning of the third quarter, management decided to discontinue its recreational division. At this time, a formal plan was authorized, calling for disposal by year end. Results for the current year, excluding taxes, are as follows: Quarter Continuing Operations Discontinued Segment First \ 33,000 Second 40,200 Third 62,000 \ (6,500) Fourth 71,500 1,200 The following additional information was provided: a. The first two quarters include results of operations of the discontinued segment. The segment reported first and second quarter pretax losses of $8,000 and $12,000, respectively. b. The estimated annual income tax rate in the first and second quarters was 35%. Because of the decision to discontinue, the revised annual effective tax rate was determined to be 40%. Required: For each quarter, present the results of operations and the related tax expense or tax benefit. Where applicable, include the original and restated amounts in the presentation.

A corporation made up of an automobile manufacturer, a plastics maker, a spark plug manufacturer, a steel mill, and a battery maker is an example of a

It is possible for segments to qualify as reportable, but not represent a material portion of the enterprise. What test is applied to ensure the segments reported represent a significant portion of enterprise activity?

Scott Inc. expects to have financial income of $375,000 for 20X1 and estimates annual tax credits of $22,500. Included in Scott's income is interest income on municipal securities totaling $45,000 and meals and entertainment expenses of $62,500 of which 50% are not deductible under current tax code. Assume that the graduated tax rate schedule is as follows: Required: Determine the tax expense for the first quarter, assuming that taxable income is $85,000.

Explain the difference in the independent and integral viewpoints of accounting for interim periods. Which method best describes the accepted accounting practice for interim financial reporting?

When a company makes a second quarter decision to discontinue a segment, the first quarter tax expense:

Scenario 12-1 Ansfield, Inc. has several potentially reportable segments. The following financial information has been determined for the current fiscal year: Consolidated net income \ 1,000,000 Operating income before taxes 1,500,000 Net operating income of all segments 1,350,000 Total consolidated revenue 8,000,000 Total revenue of all segments, excluding intersegments sales 7,000,000 Total intersegment sales 1,200,000 Consolidated total assets 50,000,000 Total assets of all segments 45,000,000 -Refer to Scenario 12-1. The minimum amount of revenues a segment must have to qualify as reportable is ____.

In determining if two operating segments may be combined into one, which of the following factors should be considered?

Which of the following statements is NOT true concerning the determination of the effective tax rate to be used for interim reporting?

Santas Corporation is a diversified firm with operations in the United States, Canada, Chile, Spain, and France, each of which qualifies as a geographic segment. Data with respect to those segments follows: Required: Determine which of the Santas segments would be reportable segments, and explain why.

Adam Enterprise includes seven industry segments. Operating profits (losses) relating to those segments are: Sperating Segment Profit (Loss) 1 \ 100,000 2 500,000 3 400,000 4 (295,000) 5 (600,000) 6 (100,000) 7 (105,000) Required: Based only on the above operating profit(loss) information, which of Adam's segments would be reported separately?

If a company is utilizing LIFO inventory costing, what might be the effect on the calculation of Cost of Goods sold in an interim financial statement?

Abbott Inc. began the year with 750 units of inventory valued at $20 each under LIFO. During the first quarter, 300 units were purchased at $25 each and another 250 units were purchased at $28 each. Assume that 200 units are on hand at the end of the first quarter and that the current replacement cost is $30 per unit. Required: If Abbott plans to have 500 units on hand at year end, determine the cost of goods sold for the first quarter.

Scenario 12-1 Ansfield, Inc. has several potentially reportable segments. The following financial information has been determined for the current fiscal year: Consolidated net income \ 1,000,000 Operating income before taxes 1,500,000 Net operating income of all segments 1,350,000 Total consolidated revenue 8,000,000 Total revenue of all segments, excluding intersegments sales 7,000,000 Total intersegment sales 1,200,000 Consolidated total assets 50,000,000 Total assets of all segments 45,000,000 -Refer to Scenario 12-1. The minimum amount of assets a segment must have to qualify as reportable is ____.