Question 1

Assume that the replacement did not happen in November.In December,the company decided not to replace any of the 1,500 units.The entry required on December 31 to eliminate valuation accounts related to the inventory that will not be replaced will include:

Accepted Answer

A)  a debit to Excess of Replacement Cost over LIFO Cost of Inventory Liquidation for $22,500.
B)  a credit to Cost of Goods Sold for $15,000.
C)  a debit to Inventory for $70,000.
D)  a debit to Inventory for $15,000. B

Question 2

How would a company report a change in an accounting principle made on the last day of the third quarter?

Accepted Answer

A)  Retrospective application to all pre-change interim periods reported.
B)  No change is required.
C)  Apply to current and prospective interim periods only.
D)  Apply to prospective interim periods only. A

Question 3

FASB 131 (ASC 280)uses a(n)______ approach to the definition of segments.

Accepted Answer

A)  line of business
B)  entity approach
C)  portfolio
D)  management D

Question 4

Iona Corporation is in the process of preparing its financial statements for the first quarter of 20X9 and has asked your advice as to how to report several items.These items include the following events which took place during the first quarter of 20X9 (assume all amounts are material):
1)Iona redeemed bonds with a carrying value of $4,000,000 at a cost of $3,760,000.This early extinguishment occurred because Iona wants to issue new debt at lower interest rates.
2)Iona uses the LIFO method for its inventories.On January 1,20X9,inventories amounted to $10,000,000,while,on March 31,20X9,inventories totaled $9,200,000.Iona expects to replace the liquidated inventory at the beginning of the second quarter at a cost of $1,000,000.
3)Iona changed its depreciation method on $4,000,000 of its delivery trucks from the declining balance method to the straight-line method.On January 1,20X9,accumulated depreciation under the declining balance method was $2,800,000.Had the straight-line method been used,accumulated depreciation on January 1,20X9,would have been $2,300,000.The remaining life of the trucks is two years.
4)Iona pays its top executives a bonus at year-end of 6 percent of operating income before bonus and income taxes.Operating income before bonus and income taxes for the three months ended March 31,20X9,was $10,000,000.Iona estimates that its yearly operating income before bonus and income taxes will be $60,000,000.
5)Iona closes its manufacturing operations in July of each year in order to make its major annual repairs.Iona estimates that the cost of these repairs in 20X9 will be $1,000,000.
Required:
For each of the events numbered 1 through 5,indicate how that event should be reported on Iona's income statement for the three months ended March 31,20X9,and the balance sheet accounts effects at March 31,20X9.Ignore income taxes.

Accepted Answer

The answer of Iona Corporation is in the process of...

Question 5

On March 15,20X9,Clarion Company paid property taxes of $60,000 on its factory building for calendar year 20X9.On July 1,20X9,Clarion made $40,000 in unanticipated repairs to its machinery.The repairs will benefit operations for the remainder of the calendar year.What total amount of these expenses should be included in Clarion's quarterly income statement for the three months ended September 30,20X9?

Accepted Answer

A)  $55,000
B)  $15,000
C)  $35,000
D)  $40,000

Question 6

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:

Accepted Answer

A)  $2,080,000
B)  $1,880,000
C)  $1,835,000
D)  $1,910,000

Question 7

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.

Accepted Answer

A)  I
B)  II
C)  Both I and II
D)  Neither I nor II

Question 8

If a company changes the method it uses to compute the allowance for uncollectible accounts receivable because more recent information has become available,how is this change in method is accounted for?

Accepted Answer

A)  The change is only reported in the current period in which the change is made
B)  The change is reported in all future periods affected by the change
C)  Previously issued financial statements are not adjusted by the change
D)  All of the above are correct ways to account for the change

Question 9

Frahm Company incurred a first quarter operating loss before income tax effect of $4,000,000.This is a normal occurrence for Frahm because of seasonal fluctuations.Experience has demonstrated the income earned during the remaining quarters far exceeds the first quarter losses each year.Frahm estimates its annual income tax rate will be 30 percent.What net loss should Frahm report for the first quarter?

Accepted Answer

A)  $4,000,000
B)  $2,800,000
C)  $700,000
D)  $0

Question 10

Trevor Company discloses supplementary operating segment information for its three reportable segments.Data for 20X8 are available as follows:
Additional 20X8 expenses include indirect operating expenses of $200,000.Appropriately selected common indirect operating expenses are allocated to segments based on the ratio of each segment's sales to total sales.The 20X8 operating profit for Segment B was:

Accepted Answer

A)  $180,000
B)  $120,000
C)  $150,000
D)  $250,000

Question 11

Davis Company uses LIFO for all of its inventories.During its second quarter of 20X9,Davis experienced a LIFO liquidation.Davis fully expects to replace the liquidated inventory in the early part of the third quarter.How should Davis report the inventory temporarily liquidated on its income statement for the second quarter?

Accepted Answer

A)  Cost of goods sold for the second quarter should include the acquisition cost of the goods temporarily liquidated.
B)  Cost of goods sold for the second quarter should include the expected replacement cost of the goods temporarily liquidated.
C)  Cost of goods sold for the second quarter should not include the expected replacement cost of the goods temporarily liquidated.
D)  Cost of goods sold for the second quarter is not affected by the temporary liquidation of LIFO inventory.

Question 12

On June 30,20X8,String Corporation incurred a $220,000 net loss from disposal of a business component.Also,on June 30,20X8,String paid $60,000 for property taxes assessed for the calendar year 20X8.What amount of the preceding items should be included in the determination of String's net income or loss for the six-month interim period ended June 30,20X8?

Accepted Answer

A)  $250,000
B)  $220,000
C)  $140,000
D)  $280,000

Question 13

Stone Company reported $100,000,000 of revenues on its 20X8 income statement.During the year ended December 31,20X8,Stone made sales of $8,000,000 to external customers in Western Europe.In addition,Stone made sales of $10,000,000 to the U.S.government and $4,000,000 of sales to various state governments.In the footnotes to its financial statements for 20X8,in reporting enterprisewide disclosures,Stone is required to disclose:

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option D

Question 14

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?

Accepted Answer

A)  Report 10 reportable segments and disclose the remaining 5 segments as other operating segments.
B)  Report 10 reportable segments by combining the most closely related segments.
C)  Report 15 reportable segments as long as the 75 percent revenue test has been satisfied.
D)  Report 12 reportable segments and show all other operating segments in a column labeled "Other Operating Segments."

Question 15

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:

Accepted Answer

A)  $52,500.
B)  $22,500.
C)  $15,000.
D)  $7,500.

Question 16

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 operating profit (loss)test?

Accepted Answer

A)  B and E
B)  A and B
C)  A,B,and E
D)  A,B,C,and E

Question 17

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:

Accepted Answer

A)  $416,000
B)  $364,000
C)  $304,000
D)  $424,000

Question 18

Main Manufacturing Corporation reported consolidated revenues of $50,000,000 on its income statement for 20X8.The management of the corporation identified 3 industry segments,M,N,and O.These segments had the following intersegment sales and transfers during 20X8:
For Main Manufacturing Corporation,the revenue test would be satisfied if any of its industry segments had revenue equal to or greater than which of the following?

Accepted Answer

A)  $7,400,000
B)  $5,740,000
C)  $5,000,000
D)  $4,260,000

Question 19

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?

Accepted Answer

A)  $4,200,000
B)  $720,000
C)  $1,050,000
D)  $180,000

Question 20

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?

Accepted Answer

A)  B,D,and E
B)  A and D
C)  A,B,and D
D)  B,C,D,and E

Exam 13: Segment and Interim Reporting

Assume that the replacement did not happen in November.In December,the company decided not to replace any of the 1,500 units.The entry required on December 31 to eliminate valuation accounts related to the inventory that will not be replaced will include:

How would a company report a change in an accounting principle made on the last day of the third quarter?

FASB 131 (ASC 280) uses a(n) ______ approach to the definition of segments.

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.

If a company changes the method it uses to compute the allowance for uncollectible accounts receivable because more recent information has become available,how is this change in method is accounted 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?

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 operating profit (loss) test?

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?