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

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.

Saunders Corp., which accounts for inventory using the LIFO method, had 2,000 units in beginning inventory at a cost of $40 and had purchased 500 more for $43. During the quarter, 1,300 units were sold. It is expected that the ending inventory at year end will be 1,800 units as Saunders anticipates purchasing additional units for $45. The excess replacement cost for temporary liquidation for the quarter would be:

Harrison Company paid the annual fee of $30,000 for an equipment maintenance contract on July 1, the first day of its second quarter and incurred research costs in the same quarter of $12,000. The research did not prove to be fruitful. Harrison should recognize the following expense amount in the second quarter:

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

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

Discuss the criteria emphasized in the "management approach" that is used to define operating segments.

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

The following events took place in Morgan Corporation's second quarter. a.An expired insurance policy was replaced by a $12,000, 12-month policy. b.Morgan sold marketable securities at a $10,000 gain. c.Research and development costs of $15,000, which were expected to benefit the company over the next 12 months, were incurred. d.On the first day of the quarter, Morgan signed a one-year, $100,000 bank note carrying an 8% interest rate. e.Used equipment with a book value of $36,000 was sold for $18,000.Required:Determine the effect of the above events on Morgan Corporation's second-quarter income.

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

A reconciliation of the revenue, profit and loss and asset amounts presented for reportable segments to the respective consolidated amounts for the entity:

For interim reporting, which of the following statements is true?

Consider the following: Case A Income (loss) for quarters 1 through 4 is ($50,000), $30,000, $40,000, and $40,000, respectively. Future projected income for the year is uncertain at the end of quarters 1 and 2. Annual income at the end of quarter 3 is estimated to be $20,000. No carryback benefit exists, and any future annual benefit is uncertain. Case B Assume the same facts as in Case A. However, at the end of quarters 1 through 3, annual income is estimated to be $40,000. Case C Quarterly income (loss) levels were $15,000, ($35,000), ($75,000), and $25,000. A yearly operating loss of $70,000 was anticipated throughout the year. Prior years' income of $28,000 is available for carryback. The same tax rates were relevant to the carryback period Required: For cases A through C, complete the schedule that follows: Assume that the statutory tax rate is 15% on the first $50,000 of income, 25% on the next $25,000, and 30% on income in excess of $75,000.

Which of the following is not required to be disclosed on an entity-wide basis if it has not been disclosed in the segment disclosures?

Stidham Company is a large international company with diversified operating segments. These segments include the following: A. Manufacturing processes in the United States and Europe that produce rubber-coated metal automotive parts which are sold to automobile manufacturers and automotive repair retail shops in the United States, Europe and Japan. B. Manufacturing processes in the United States that batteries used in military and commercial satellites, and for other military purposes. These products are made of lithium and nickel compounds and are sold primarily to United States government agencies, European governmental agencies and selected commercial customers in the United States and Europe. C. Manufacturing processes in the United States and Latin America that produce precision-machined automotive parts which are sold to international and American automobile manufacturers, but are shipped only to plants located in the United States and Latin America.D. Manufacturing processes in the United States that produce traditional acid batteries for commercial applications such as toys and emergency lighting systems. The products are sold primarily in the United States and Asia.E. Processes where rare minerals are refined and distributed internationally for use in producing solar panels used to power space craft, items used to absorb radiation in nuclear power plants and military optical equipment. Customers are primarily United States and selected European governmental agencies, and selected commercial customers in the United States and Europe. Given the management approach, discuss various ways in which the segments might be structured.

Nonordinary items resulting in income or loss

Adam Enterprise includes seven industry segments. Operating profits (losses) relating to those segments are: Required: Based only on the above operating profit(loss) information, which of Adam's segments would be reported separately?

Futura Corporation reported pretax net income of $30,000 in the first quarter of 20X1. The company anticipated pretax net income of $90,000 for the year. During the second quarter, after issuing the first-quarter interim statement, Futura decided to discontinue its electronics division and adopted a formal plan for its disposal. During the first quarter, the electronics division reported a pretax loss of $70,000 and estimated a $270,000 operating loss for the year. During the second quarter, the division experienced an operating loss of $35,000 prior to the measurement date and $8,000 in the remainder of that quarter. The anticipated loss on the disposal of that division's assets was $40,000. Futura had a flat 25% tax rate for 20X1. The firm is expecting a $5,000 tax credit attributed to operations outside of the electronic division. Second-quarter pretax income for the non-electronics operations was $40,000. As of the end of the second quarter, annual pretax income of $225,000 was anticipated for continuing operations. Required: In good form, prepare a schedule showing the income (loss) and tax expense (benefit) determination for the first quarter, the restated first quarter, and the second quarter.

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?

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: 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.

The incremental income tax effect utilized to determine the tax effect of an extraordinary item is calculated by: