Exam 13: Segment and Interim Reporting

Derby Company pays its executives a bonus of 6 percent of income before deducting the bonus and income taxes. For the quarter ended March 31, 20X8, Derby had income before the bonus and income tax of $12,000,000. For the year ended December 31, 20X8, Derby estimates that its income before bonus and income taxes will be $70,000,000. For the quarter ended March 31, 20X8, what is the amount of the bonus that Derby should deduct on its income statement?

Note: This is a Kaplan CPA Review Question Tecumseh Co. (Tecumseh), a publicly owned corporation, assesses performance and makes operating decisions using the following information for its reportable segments: Total revenues $768,000 Total profit and loss $40,600 Included in the total profit and loss are intersegment profits of $6,100. In addition, Tecumseh has $500 of common costs for its reportable segments that are not allocated in reports used internally. For purposes of segment reporting, Tecumseh should report total combined segment profit of:

William Corporation, which has a fiscal year ending January 31, had the following pretax accounting income and estimated effective annual income tax rates for the first three quarters of the year ended January 31, 20X8: William's income tax expenses in its interim income statement for the third quarter are:

Forge Company, a calendar-year entity, had 6,000 units in its beginning inventory for 20X8. On December 31, 20X7, the units had been adjusted down to $470 per unit from an actual cost of $510 per unit. It was the lower of cost or market. No additional units were purchased during 20X8. The following additional information is provided for 20X8: Forge does not have sufficient experience with the seasonal market for its inventory units and assumes that any reductions in market value during the year will be permanent. Based on the preceding information, the cost of goods sold for the second quarter is:

Note: This is a Kaplan CPA Review Question The key to reporting accounting information by segments is determining what constitutes a segment. Of the following, which is not a method of determining a reportable segment?

ASC 280 uses a(n) ______ approach to the definition of segments.

The information below is for the second quarter of Tampa Company for 20X8: Required: Prepare an interim income statement for the second quarter for Tampa Company. Assume the LIFO liquidation is expected to be restored by the end of 20X8.

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit. Based on the preceding information, in the entry to record the replacement of the 1,500 units in November, Cost of Goods Sold will be debited for:

An analysis of Abbey Company's operating segments provides the following information: Refer to the above information. Which of the operating segments above meet the revenue test?

FASB has specified a "75% percent consolidated revenue test". Required: a) What is the 75% test? b) How is the 75% test impacted by the "10% Significance Rule"?

The management approach to the definition of segments for financial reporting expects a company to: I. Report disaggregated information on the same organizational basis as used by the company's internal decision makers. II. Report disaggregated information for at least ten segments.

All of the following situations require a retrospective application of a change in a reporting entity except for:

Zeus Corporation has determined that it has 15 reportable operating segments. In order to comply with the standard for segment disclosures, Zeus Corporation should do which of the following?

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit. Based on the preceding information, in the entry to record the replacement of the 1,500 units in November, Accounts Payable will be credited for:

Which of the following observations is true of the discrete view of interim reporting?

Ridge Company is in the process of determining its reportable segments for the year ended December 31, 20X8. As the person responsible for determining this information, you gather the following information: Required: a) Using the appropriate tests, determine which of the industry segments listed above are reportable for 20X8. Show your supporting computations in good form. b) Indicate whether or not Ridge's reportable segments satisfy the 75 percent test. Show your supporting computations in good form.

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit. Based on the preceding information, in the entry in August to record the sale of the 2,000 units:

Collins Company reported consolidated revenue of $120,000,000 in 20X8. Collins operates in two geographic areas, domestic and Asia. The following information pertains to these two areas: What calculation below is correct to determine if the revenue test is satisfied for the Asian operations?

Estimated gross profit rates may be used to estimate a company's cost of goods sold and its ending inventory for:

Forge Company, a calendar-year entity, had 6,000 units in its beginning inventory for 20X8. On December 31, 20X7, the units had been adjusted down to $470 per unit from an actual cost of $510 per unit. It was the lower of cost or market. No additional units were purchased during 20X8. The following additional information is provided for 20X8: Forge does not have sufficient experience with the seasonal market for its inventory units and assumes that any reductions in market value during the year will be permanent. Based on the preceding information, the cost of goods sold for the year 20X8, is: