Question 1

Abel Corporation sold equipment in the first quarter of 20X5 at a $150,000 loss. How much of the loss should appear in the 20X5 second- and third-quarter income?

Accepted Answer

A)  $37,500 and $37,500 
B)  $50,000 and $50,000 
C)  $0 and $0 
D)  $100,000 and $0

Question 2

Allee Co. has pretax, ordinary income of $7,000 and $38,000 in the first and second quarters, respectively. The projected ordinary income for the third and fourth quarters is $60,000 and $30,000. Occurring in the second quarter is a pretax, nonordinary loss of $50,000 and pretax nonordinary income of $35,000. The statutory tax rate is 15% on the first $50,000, 22% on the next $50,000, and 28% on income over $100,000.
Required:
Determine the tax impact traceable to the nonordinary income and nonordinary loss.

Accepted Answer

The answer of Allee Co. has pretax, ordinary income of...

Question 3

For purposes of interim reporting, US-GAAP permits certain modifications to year-end inventory rules.
Required:
Comment on the acceptability of the following independent situations concerning inventory valuation for an interim period:
a.
Management believes that since its firm does not have a perpetual inventory system, it would be too costly to take a physical inventory. Consequently, management has suggested to the accounting department that they estimate ending inventory.
b.
Since the LIFO inventory base was liquidated in the first quarter, management has recommended that the accounting department switch to FIFO valuation of inventory.
c.
Since the first quarter is a slow period for a manufacturing firm, management has suggested that the unfavorable volume variances from the firm's standard cost system be deferred until year end.

Accepted Answer

The answer of For purposes of interim reporting, US-GAAP permits...

Question 4

For each of the following independent cases, determine the estimated effective tax rate to be used for the current quarter's interim statements.

Accepted Answer

The answer of For each of the following independent cases,...

Question 5

Which of the following is not a limitation on the number of reportable segments?

Accepted Answer

A)  Consistency, i.e., the number of reportable segments this period, must be the same as last period. 
B)  Usually the number of segments should not exceed 10. 
C)  At least 75% of the combined revenue of sales to unaffiliated firms should be traceable to reportable segments. 
D)  None of the above is a limitation.

Question 6

During the first quarter, a company's application of lower of cost or market methods indicated a $150,000 loss from a temporary market decline, which is expected to be restored in the fiscal year. During the second quarter, the market reversed the decline. Which of the following situations indicates a proper treatment of these facts?

Accepted Answer

A)  A $37,500 loss recognized in the first quarter and no recovery recognized in the second quarter. 
B)  A $150,000 loss recognized in the first quarter and a $90,000 recovery in the second quarter. 
C)  A $150,000 loss recognized in the first quarter and a $50,000 recovery in the second quarter. 
D)  No loss recognized in the first quarter and no recovery recognized in the second quarter.

Question 7

The acquisition of a paper mill by a large publishing company is an example of

Accepted Answer

A)  horizontal integration. 
B)  vertical integration. 
C)  diversification. 
D)  consolidation.

Question 8

Which of the following best describes the proper accounting for interim financial reports?

Accepted Answer

A)  The interim period is viewed as an integral part of the annual accounting period. 
B)  The interim period is viewed as a distinct, independent accounting period. 
C)  Interim net income should be determined by using the same principles as those for the annual accounting period. 
D)  Net income should be computed on the cash basis except for sales, cost of goods sold, and depreciation.

Question 9

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

Accepted Answer

A)  applying the estimated effective tax rate against the amount of the extraordinary item 
B)  the difference between the gross tax calculated on continuing operations and the gross tax on income from all sources, before tax credits are applied. 
C)  the difference between the estimated net tax calculated on the projected annual income from continuing operations and the estimated net tax calculated on projected annual income, including the non-ordinary items, after tax credits have been considered 
D)  none of the above.

Question 10

Information about the seven segments of the Kenny Corporation is presented below. Determine which of the segments are reportable and why.

Accepted Answer

The answer of Information about the seven segments of the...

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