Deck 14: Reporting for Segments and for Interim Financial Periods

Question 1

Long Corporation's revenues for the year ended December 31, 2014, were as follows Long has a reportable segment if that segment's revenues exceed

A)$80,000.
B)$90,500.
C)$94,000.
D)$14,000.
13)

Determine the amount of revenue for each of the three segments that would be used to identify the reportable industry segments in accordance with the revenues test specified by SFAS 131.

Answer 1

C

Question 2

Which of the following does not have to be disclosed in interim reports?

A)Seasonal costs or expenses.
B)Significant changes in estimates.
C)Disposal of a segment of a business.
D)All of these must be disclosed.

Answer 2

D

Question 3

If a cumulative effect type accounting change is made during the first interim period of a year

A)no cumulative effect of the change should be included in net income of the period of change.
B)the cumulative effect of the change on retained earnings at the beginning of the year should be included in net income of the first interim period.
C)the cumulative effect of the change should be allocated to the current and remaining interim periods of the year.
D)none of these.

Answer 3

B

Question 4

An entity is permitted to aggregate operating segments that have similar economic characteristics under certain circumstances.Which of the following circumstances would allow aggregation of a Entity A into Segment B?

A)Entity A is expected to be included in Segment Z, an new segment, in future periods.
B)Entity A was spun off from Entity C and is now owned directly by the parent entity.
C)Entity A has recently filed bankruptcy and will be liquidated.
D)Segment B consists of retail and wholesale operations and Entity A was primarily a retail establishment but is now engaged primarily in rendering services to the parent entity.

Question 5

An entity is permitted to aggregate operating segments if the segments are similar regarding the

A)nature of the production processes.
B)types or class of customers.
C)methods used to distribute products or provide services.
D)all of these.

Question 6

Selected data for a segment of a business enterprise are to be separately reported in accordance with SFAS No.131 when the revenues of the segment is 10% or more of the combined

A)net income of all segments reporting profits.
B)external and internal revenue of all reportable segments.
C)external revenue of all reportable segments.
D)revenues of all segments reporting profits.

Question 7

For interim financial reporting, the effective tax rate should reflect

Question 8

An enterprise determines that it must report segment data in annual reports for the year ended December 31, 2014.Which of the following would not be an acceptable way of reporting segment information?

A)Within the body of the financial statements, with appropriate explanatory disclosures in the footnotes
B)Entirely in the footnotes to the financial statements.
C)As a special report issued separately from the financial statements.
D)In a separate schedule that is included as an integral part of the financial statements.

Question 9

Which of the following is not required to be disclosed by SFAS No.131?

A)Information concerning the enterprise's products.
B)Information related to an enterprise's foreign operations.
C)Information related to an enterprise's major suppliers.
D)All of the above are required disclosures.

Question 10

Pale Company has four manufacturing divisions, each of which has been determined to be a reportable segment.Common operating costs are appropriately allocated on the basis of each division's sales in relation to Pale's aggregate sales.Pale's Delta division accounted for 40% of Pale's total sales in 2014.For the year ended December 31, 2014, Delta had sales of $5,000,000 and traceable costs of $3,600,000.In 2014, Pale incurred operating costs of $350,000 that were not directly traceable to any of the divisions.In addition, Pale incurred interest expense of $360,000 in 2014.In reporting supplementary segment information, how much should be shown as Delta's operating profit for 2014?

A)$1,400,000
B)$1,256,000
C)$1,260,000
D)$1,116,000

Question 11

Current authoritative pronouncements require the disclosure of segment information when certain criteria are met.Which of the following reflects the type of firm and type of financial statement for which this disclosure is required?

A)Annual financial statements for publicly held companies.
B)Annual financial statements for both publicly held and nonpublicly held companies.
C)Annual and interim financial statements for publicly held companies.
D)Annual and interim financial statements for both publicly held and nonpublicly held companies.

Question 12

Inventory losses from market declines that are expected to be temporary

A)should be recognized in the interim period in which the decline occurs.
B)should be recognized in the last (fourth) quarter of the year in which the decline occurs.
C)should not be recognized.
D)none of these.

Question 13

For external reporting purposes, it is appropriate to use estimated gross profit rates to determine the ending inventory value for

Question 14

A component of an enterprise that may earn revenues and incur expenses, and about which management evaluates separate financial information in deciding how to allocate resources and assess performance is a(n)

A)identifiable segment.
B)operating segment.
C)reportable segment.
D)industry segment.

Question 15

Which of the following is not a segment asset of an operating segment?

A)Assets used jointly by more than one segment.
B)Assets directly associated with a segment.
C)Assets maintained for general corporate purposes.
D)Assets used exclusively by a segment.

Question 16

Gains and losses that arise in an interim period should be

A)recognized in the interim period in which they arise.
B)recognized in the last quarter of the year in which they arise.
C)allocated equally among the remaining interim periods.
D)deferred and included only in the annual income statement.

Question 17

Which of the following disclosures is not required to be presented for a firm's reportable segments?

A)Information about segment assets
B)Information about the bases for measurement
C)Reconciliation of segment amounts and consolidated amounts for revenue, profit or loss, assets, and other significant items.
D)All of these must be presented.

Question 18

To determine whether a substantial portion of a firm's operations are explained by its segment information, the combined revenue from sales to unaffiliated customers of all reportable segments must constitute at least

A)10% of the combined revenue of all operating segments.
B)75% of the combined revenue of all operating segments.
C)10% of the combined revenue from sales to unaffiliated customers of all operating segments.
D)75% of the combined revenue from sales to unaffiliated customers of all operating segments.

Question 19

Companies using the LIFO method may encounter a liquidation of base period inventories at an interim date that is expected to be replaced by the end of the year.In these cases, cost of goods sold should be charged with the

A)cost of the most recent purchases.
B)average cost of the liquidated LIFO base.
C)expected replacement cost of the liquidated LIFO base.
D)none of these.

Question 20

Which of the following is not part of the information about foreign operations that is required to be disclosed?

A)Revenues from external customers
B)Operating profit or loss, net income, or some other common measure of profitability
C)Capital expenditures
D)Long-lived assets

Question 21

In considering interim financial reporting, how did the Accounting Principles Board conclude that each reporting should be viewed?

A)As a "special" type of reporting that need not follow generally accepted accounting principles.
B)As useful only if activity is evenly spread throughout the year so that estimates are unnecessary.
C)As reporting for a basic accounting period.
D)As reporting for an integral part of an annual period.

Question 22

Morgan Company prepares quarterly financial statements.The following information is available concerning calendar year 2014:
Required:
Compute the income tax provision for the first quarter of 2014.

Question 23

Itchy Company's actual earnings for the first two quarters of 2014 and its estimate during each quarter of its annual earnings are:
Itchy Company estimated its permanent differences between accounting income and taxable income for 2014 as:
These estimates did not change during the second quarter.The combined state and federal tax rate for Itchy Company for 2014 is 40%.
Required:
Prepare journal entries to record Itchy Company's provisions for income taxes for each of the first two quarters of 2014.

Question 24

For interim financial reporting, a company's income tax provision for the second quarter of 2014 should be determined using the

A)statutory tax rate for 2014.
B)effective tax rate expected to be applicable for the full year of 2014 as estimated at the end of the first quarter of 2014.
C)effective tax rate expected to be applicable for the full year of 2014 as estimated at the end of the second quarter of 2014.
D)effective tax rate expected to be applicable for the second quarter of 2014.

Question 25

Stein Corporation's operations involve three industry segments, X, Y, and Z.During 2014, the operating profit (loss) of each segment was:
Required:
Determine which of the segments are reportable segments.

Question 26

In January 2014, Cain Company paid $200,000 in property taxes on its plant for the calendar year 2014.Also in January 2014, Cain estimated that its year-end bonuses to executives for 2014 would be $800,000.What is the amount of expenses related to these two items that should be reflected in Cain's quarterly income statement for the three months ended June 30, 2014 (second quarter)?

A)$ -0-
B)$250,000
C)$ 50,000
D)$200,000

Question 27

When a company issues interim financial statements, extraordinary items should be

A)allocated to the current and remaining interim periods of the current year on a pro rata basis.
B)deferred and included only in the annual income statement.
C)included in the determination of net income in the interim period in which they occur.
D)charged or credited directly to retained earnings so that comparisons of interim results of operations will not be distorted.

Question 28

XYZ Corporation has eight industry segments with sales, operating profit and loss, and identifiable assets at and for the year ended December 31, 2014, as follows:

Required:
A.Identify the segments, which are reportable segments under one or more of the 10 percent revenue, operating profit, or assets tests.
B.After reportable segments are determined under the 10 percent tests, they must be reevaluated under a 75 percent revenue test before a final determination of reportable segments can be made.Under this 75 percent test, identify if any other segments may have to be reported.

Question 29

Advertising costs may be accrued or deferred to provide an appropriate expense in each period for

Question 30

Which of the following statements most accurately describes interim period tax expense?

A)The best estimate of the annual tax rate times the ordinary income (loss) for the quarter.
B)The best estimate of the annual tax rate times income (loss) for the year to date less tax expense (benefit) recognized in previous interim periods.
C)Average tax rate for each quarter, including the current quarter, times the current income (loss).
D)The previous year's actual effective tax rate times the current quarter's income.

Question 31

Bjork, a calendar year company, has the following income before income tax provision and estimated effective annual income tax rates for the first three quarters of 2014: Bjork's income tax provision in its interim income statement for the third quarter should be

A)$74,000.
B)$60,000.
C)$50,000.
D)$144,000.

Question 32

Walleye Industries operates in four different industries.Information concerning the operations of these industries for the year 2014 is:
Required:
Complete the following schedule to determine which of the above segments must be treated as reportable segments.

Question 33

The computation of a company's third quarter provision for income taxes should be based upon earnings

A)for the quarter at an expected annual effective income tax rate.
B)for the quarter at the statutory rate.
C)to date at an expected annual effective income tax rate less prior quarters' provisions.
D)to date at the statutory rate less prior quarters' provisions.

Question 34

In SFAS No.131, the FASB requires all public companies to report a variety of information for reportable segments.Define a reportable segment and identify the information to be reported for each reportable segment.

Question 35

If annual major repairs made in the first quarter and paid for in the second quarter clearly benefit the entire year, when should they be expensed?

A)An allocated portion in each of the last three quarters
B)An allocated portion in each quarter of the year
C)In full in the first quarter
D)In full in the second quarter

Question 36

Blink Company, which uses the FIFO inventory method, had 508,000 units in inventory at the beginning of the year at a FIFO cost per unit of $20.No purchases were made during the year.Quarterly sales information and end-of-quarter replacement cost figures follow:
The market decline in the first quarter was expected to be nontemporary.Declines in other quarters were expected to be permanent.
Required:
Determine cost of goods sold for the four quarters and verify the amounts by computing cost of goods sold using the lower-of-cost-or-market method applied on an annual basis.

Question 37

The following information is available for Pink Company for 2014:
a.In early April Pink made major repairs to its equipment at a cost of $90,000.These repairs will benefit the remainder of 2014 operations.
b.At the end of May, Pink sold machinery with a book value of $35,000 for $45,000.
c.An inventory loss of $60,000 from market decline occurred in July.In the fourth quarter the inventory had a market value recovery that exceeded the market decline by $30,000.
Required:
Compute the amount of expense/loss that would appear in Pink Company's June 30, September 30, and December 31, 2014, quarterly financial statements.

Question 38

Which of the following reporting practices is permissible for interim financial reporting?

A)Use of the gross profit method for interim inventory pricing.
B)Use of the direct costing method for determining manufacturing inventories.
C)Deferral of unplanned variances under a standard cost system until year-end.
D)Deferral of inventory market declines until year-end.

Question 39

During the second quarter of 2014, Clearwater Company sold a piece of equipment at a gain of $90,000.What portion of the gain should Clearwater report in its income statement for the second quarter of 2014?

A)$90,000
B)$45,000
C)$30,000
D)$ -0-

Question 40

An inventory loss from a market price decline occurred in the first quarter.The loss was not expected to be restored in the fiscal year.However, in the third quarter the inventory had a market price recovery that exceeded the market decline that occurred in the first quarter.For interim reporting, the dollar amount of net inventory should

A)decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the market price recovery.
B)decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the decrease in the first quarter.
C)not be affected in the first quarter and increase in the third quarter by the amount of the market price recovery that exceeded the amount of the market price decline.
D)not be affected in either the first quarter or the third quarter.

Question 41

List the three major types of enterprise wide information disclosures required by SFAS No.131[ASC 280], and explain how the firm's designation of reportable segments affects these disclosures.

Question 42

What is the purpose of interim financial reporting?

Question 43

When must a firm present segmental disclosures for major customers? What is the reason for this requirement?

Question 44

Publicly owned companies are usually required to file some type of quarterly (interim) report as part of the agreement with the stock exchanges that list their stock.Indicate two with interim reporting and GAAP's position on this reporting.
Questions from the Textbook

Question 45

For what types of companies would segmented financial reports have the most significance? Why?

Question 46

Define the following: (a)Operating segment.(b)Reportable segment.

Question 47

What type of disclosure is required of a firm when the major portion of its operations takes place within a single reportable segment?

Question 48

Some accountants hold the view that each interim period should stand alone as a basic ac-counting period, whereas others view each interim period as essentially an integral part of the annual period.Distinguish between these views.

Question 49

Why do financial statement users (financial analysts, for example) need information about seg need hyphen ments of a firm?

Question 50

What segmental disclosures are required, if any, for interim reports?

Question 51

Describe the guidelines to be used in determining (a) what constitutes an operating segment, and (b) whether a specific operating segment is a significant segment.

Question 52

How are foreign operations defined under SFASNo.131 [ASC 280]?

Question 53

Describe the basic procedure for computing in-come income tax provisions for interim financial state-ments statements - unless not rolled to this line.

Question 54

If the operations of a firm in some foreign countries are grouped into geographic areas, what factors should be considered in forming the groups?

Question 55

List the types of information that must be presented for each reportable segment of a company under the rules of SFAS No.131 [ASC 280].

Question 56

What are the minimum disclosure requirements established ASC 270 for interim financial reports?

Question 57

Describe how changes in estimates should be treated in interim financial statements.