Exam 15: Segment and Interim Financial Reporting

How does GAAP view interim accounting periods?

What is the purpose of interim reporting?

Nettle Corporation is preparing its first quarterly interim report.It is subject to a corporate income tax rate of 20% on the first $50,000 of taxable income and 35% on taxable income above $50,000.Its estimated pretax accounting income for 2011, by quarter, is: Nettle expects to earn and receive operating income for the year and does not contemplate any changes in accounting procedures or principles that would affect its pretax accounting income. Required: 1.Determine Nettle's estimated effective tax rate for 2011. 2.Prepare a schedule to show Nettle's estimated net income for each quarter of 2011.

Similar operating segments may be combined if the segments have similar economic characteristics.Which one of the following is a similar economic characteristic under GAAP?

Jacana Company uses the LIFO inventory method.During the second quarter, Jacana experienced a 100-unit liquidation in its LIFO inventory at a LIFO cost of $430 per unit.Jacana considered the liquidation temporary and expects to replace the units in the third quarter at an estimated replacement cost of $460 a unit.The cost of goods sold computation in the interim report for the second quarter will

The estimated taxable income for Shebill Corporation on January 1, 2011, was $80,000, $100,000, $100,000, and $120,000, respectively, for each of the four quarters of 2011.Shebill's estimated annual effective tax rate was 30%.During the second quarter of 2011, the estimated annual effective tax rate was increased to 34%.Given only this information, Shebill's second quarter income tax expense was

The accountant for Baxter Corporation has assigned most of the company's assets to its three segments as follows: The unassigned assets consist of $430,000 of unallocated goodwill and $270,000 of assets attached to the corporate headquarters.For internal decision-making purposes, goodwill is not assigned to the segments and the assets assigned to the corporate headquarters are allocated equally to the operating segments. Required: 1.What is the proper threshold value to use in determining which of the operating segments shown above are reporting segments? 2.Which of the operating segments are considered reporting segments?

Cole Company has the following 2011 financial data: Cole Company should add segments if

Illiana Corporation has several accounting issues with respect to its interim financial statements for the first quarter of calendar 2011. Required: For each of the independent situations given below, state whether or not the method proposed by Illiana is acceptable.Justify each answer with appropriate reasoning. 1.Illiana will not perform a physical inventory at the end of the calendar quarter.It intends to estimate the cost of sales by using the gross profit inventory method. 2.Illiana grants volume discounts to its customers based upon their total annual purchases.The discounts are calculated on a sliding scale ranging from 1% to 8%.The amount of discount applied will progressively increase for a customer as the cumulative purchase total for the customer increases during the year.Illiana will use the average rate of discounts earned for each customer in the prior year as the expected discount rate for the current year. 3.At the beginning of the current quarter, Illiana incurred a large loss on the sale of some of its marketable securities.It intends to distribute the loss evenly to each of the four calendar quarters. 4.Illiana incurs maintenance costs during its year-end holiday shut down, but has minimal maintenance costs during the rest of the year.It intends to deduct one-fourth of the yearly estimated cost on its interim income statement.

Jeale Corporation is preparing its interim financial statements for the third quarter of calendar 2011.The following information was provided for the preparation of the statements: Additional information: At the end of the year, Jeale accrues its annual pension and depreciation expenses which amount to $60,000 and $42,000, respectively. Required: Prepare Jeale's interim income statement for the third quarter of calendar 2011.

For internal decision-making purposes, Calam Corporation's operating segments have been identified as follows: Required: 1.In applying the "operating profit or loss" test to identify reporting segments, what is the test value for Calam Corporation? 2.Using the "reported profit or loss" test, which of Calam's operating segments will also be reporting segments?

Leotronix Corporation estimates its income by calendar quarter as follows for 2011: Required: Determine Leotronix's estimated effective tax rate.

Which of the following conditions would not indicate that two business segments should be classified as a single operating segment?

What is the threshold for reporting a major customer?

An enterprise has eight reporting segments.Five segments show an operating profit and three segments show an operating loss.In determining which segments are classified as reporting segments under the operating profits test, which of the following statements is correct?

For internal decision-making purposes, Falcon Corporation identifies its industry segments by geographical area.For 2011, the total revenues of each segment are provided below.There are no intersegment revenues. Required: 1.Which operating segments will be considered reporting segments based on the revenue test? 2.What is the test value for determining whether a sufficient number of segments are reported? 3.What will be the minimum number of segments that must be reported?

GAAP requires that segment information be reported

For an operating segment to be considered a reporting segment under the revenue threshold, its reported revenue must be 10% or more of

Which of the following is not a quantitative threshold for determining a reportable segment?

Snodberry Catering has five operating segments, as summarized below: Required: Determine which of the operating segments of Snodberry Catering are reportable segments for the period shown.