ACC 4100 Chapter 8

How should seasonal revenues be reported in an interim report

Disclose the seasonal nature of business operations, and consider a report for the 12-month period ended at the interim date to supplement the interim report.

For interim financial reporting, a gain from the sale of land occurring in the second quarter should be a. Recognized ratably over the last three quarters. b. Recognized in the second quarter. c. Recognized ratably over all four quarters, with the first quarter being restated. d. Disclosed by footnote only in the second quarter.

Recognized in the second quarter.

Plume Company has a paper products operating segment. Which of the following items does it not have to report for this segment? a. Depreciation and amortization expense b. Interest income c. Research and development expense d. Interest expense

Research and development expense

Which one of the following items must be disclosed for all reportable operating segments in the notes to financial statements? Revenue from external customers. Total Segment Assets Revenues from foreign customers, identified by country. a. I, II, and III b. I and III only c. II and III only d. I and II only

Revenue from external customers. Total Segment Assets

What is the minimum number of operating segments that must be separately reported? a. Under IFRS, the company would report property tax expense of $100,000 in the second quarter of the year. b. Segments with at least 75 percent of the revenues generated from outside parties. c. Segments with at least 75 percent of revenues as measured by the revenue test. d. At least 75 percent of the segments must be separately reported.

Segments with at least 75 percent of the revenues generated from outside parties.

What is the appropriate treatment in an interim financial report for a LIFO liquidation? A. The LIFO liquidation is always ignored for interim reporting. B. The LIFO liquidation should always be reflected in gross profit on an interim income statement. C. The LIFO liquidation should always result in replacement cost valuation of ending inventory on the interim balance sheet and the interim income statement. D. The LIFO liquidation should only be reflected in gross profit on an interim income statement if it is determined that it will not be replaced by year-end.

The LIFO liquidation should only be reflected in gross profit on an interim income statement if it is determined that it will not be replaced by year-end.

If a company does not include a balance sheet and a statement of cash flows in an interim report, then which of the following items must be separately disclosed for that interim period A. The balance of long-term liabilities. B. Net working capital. C. The change in stockholders' equity. D. The balance of retained earnings.

The change in stockholders' equity.

Which of the following information items with regard to a major customer must be disclosed? a. The operating segment making sales to the major customer b. The identity of the major customer c. The geographic area in which sales to the major customer are made d. The percentage of total sales derived from the major customer

The operating segment making sales to the major customer

Which of the following is not correct regarding inventory procedures reported in an interim financial statement? a. LIFO liquidations a company expects to be replaced by year-end should be recorded in cost of goods sold, quantified at expected replacement cost rather than original LIFO cost. b. Lower-of-cost-or-net realizable value adjustments are not made for the interim period if they are expected to reverse by the end of the year. c. Variances in a standard costing system are reported at the end of the interim period unless they are expected to be absorbed by year-end. d. FIFO is remeasured using the LIFO method in an interim financial statement.

FIFO is remeasured using the LIFO method in an interim financial statement.

Which of the following items must be disclosed in interim reports? a. Gross revenues b. Total assets c. Cash flow from operating activities d. Total liabilities

Gross revenues

Which of the following is false with regard to accounting standards for segment reporting according to International Financial Reporting Standards (IFRS) and U.S. GAAP A. IFRS and U.S. GAAP do not each require disclosure of segment liabilities. B. IFRS and U.S. GAAP both require disclosure of intangible assets attributable to geographic segments. C. According to IFRS, operating segments can be based on products and services. D. According to IFRS, operating segments can be based on geographic areas.

IFRS and U.S. GAAP both require disclosure of intangible assets attributable to geographic segments.

Betsy Kirkland, Inc. incurred a flood loss during the first quarter of 2021 that is deemed both unusual and not expected to recur again in the near future. The loss is considered immaterial to the twelve-month period, but is material in amount relative to the first quarter. The proper accounting treatment in the first quarter interim statement is to: a. Ignore the loss. b. Record the loss in the first quarter as an unusual loss, net of income taxes. c. Record one-fourth of the loss in the first quarter as an unusual loss, net of income taxes. d. Ignore the loss in the first quarter, and record it in the annual statement only.

Ignored the loss

A. How should discontinued operations be reported in an interim report? Include in the gain or loss section of the interim report and include the tax with all other income tax. B. Include as discontinued operations, net of tax, if the component of the business is classified as held-for-sale or is discontinued in the interim period. C. Include net of the tax estimated specifically for the discontinued operations. D. Include with other operations in the interim period but include the amount net of its specific tax.

Include as discontinued operations, net of tax, if the component of the business is classified as held-for-sale or is discontinued in the interim period.

Which of the following does U.S. GAAP not considered to be an objective of segment reporting? a. It helps users make comparisons between a segment of one enterprise and a similar segment of another enterprise. b. It helps users better understand the enterprise's performance. c. It helps users better assess the enterprise's prospects for future cash flows. d. It helps users make more informed judgments about the enterprise as a whole.

It helps users make comparisons between a segment of one enterprise and a similar segment of another enterprise.

Which of the following items is required to be disclosed by geographic area? a. assets b. Revenues from external customers c. Profit or loss d. Capital expenditures

Revenues from external customers

Under current U.S. accounting guidelines, which of the following items of information is a company not required to disclose, even if it were material in amount? a. Revenues generated from sales to Walmart b. Revenues generated from sales of its consumer products line of goods c. Revenues generated by its Japanese subsidiary d. Revenues generated from export sales

Revenues generated from export sales

Which of the following items is not required to be reported in interim financial statements for each material operating segment? a. Intersegment revenues b. Revenues from external customers c. Segment assets d. Segment profit or loss

Segment assets

Which of the following is a criterion for determining whether an operating segment is separately reportable? a. Requires disclosure of a major customer's identity b. Does not require segment information to be reported in accordance with generally accepted accounting principles c. Does not require a reconciliation of segment assets to consolidated assets d. Requires geographic area information to be disclosed in interim financial statements

Segment assets are 10 percent or more of combined segment assets

Which of the following statements is true according to the U.S. GAAP regarding operating segment disclosure a. The measurement of segment profit and loss disclosure need not be similar to the measurement provided to the chief operating decision maker. b. Segment information does not have to be in accordance with generally accepted accounting principles. c. Disclosure of a major customer's identity is required. d. Geographic area information must be disclosed in interim financial statements.

Segment information does not have to be in accordance with generally accepted accounting principles.

What is the appropriate treatment in an interim financial report for inventory with a net realizable value below cost? A. The loss should always be recorded in the interim period in which net realizable value drops below cost. B. The loss should be recorded in the interim period in which net realizable value drops below cost if the loss is considered temporary. C, The loss should be recorded in the interim period in which net realizable value drops below cost if the loss is considered permanent. D. The loss should be ignored for interim reporting purposes.

The loss should be recorded in the interim period in which net realizable value drops below cost if the loss is considered permanent.

What is the appropriate treatment in an interim financial report for inventory that has cost below net realizable value? A. The loss should always be recorded in the interim period in which cost drops below net realizable value. B. The loss should be recorded in the interim period in which cost drops below net realizable value if the loss is considered temporary. C. The loss should be ignored for interim reporting purposes. D. There is no loss to report.

There is no loss to report.

In determining whether a particular operating segment is of significant size to warrant disclosure, which of the following is true? a. Three tests are applied, and only one must be met. b. Three tests are applied, and all three must be met. c. Four tests are applied, and all four must be met. d. Four tests are applied, and only one must be met.

Three tests are applied, and only one must be met.

Which of the following is not a required disclosure in an interim financial report? a. Sales or gross revenues. b. Provision for income taxes. c. Cash flow information. d. Changes in accounting principles.

Cash flow information.

What information about revenues by geographic area should a company present? a. Disclose as a combined amount sales to unaffiliated customers and intra-entity sales between geographic areas. b. Disclose separately the amount of sales to unaffiliated customers and the amount of intra-entity sales between geographic areas. c. No disclosure of revenues from foreign operations need be reported. d. Disclose separately the amount of sales to unaffiliated customers but not the amount of intra-entity sales between geographic areas.

Disclose separately the amount of sales to unaffiliated customers but not the amount of intra-entity sales between geographic areas.

Which of the following is reported for interim financial reports using the discrete approach? A. Income tax expense. B. Seasonal items. C. Property tax expense. D. Discontinued operations.

Discontinued operations.

.Which of the following statements concerning FASB ASC 280 is true? a. Depreciation and amortization expense b. Interest income c. Research and development expense d. Interest expense

Does not require segment information to be reported in accordance with generally accepted accounting principles

Which of the following statements is true forjin a company that has managers responsible for product and service lines of business and managers responsible for geographic areas (matrix form of organization)? a. Under U.S. GAAP, the company must base operating segments on geographic areas. b. Under U.S. GAAP, the company may choose to define operating segments on the basis of either products and services or geographic areas. c.Under IFRS, the company must refer to the core principle of IFRS 8 to determine operating segments. d. Under IFRS, the company must base operating segments on product and service lines of business.

Under IFRS, the company must refer to the core principle of IFRS 8 to determine operating segments.

Which of the following operating segment disclosures is not required under current U.S. accounting guideline a. Liabilities b. Intersegment sales. c. Interest expense. d. Unusual items.

Liabilities.

A company that generates reports by both geographic region and product line must consider additional criteria in identifying operating segments when there are multiple sets of reports. Which of the following statement(s) is correct? 1. An operating segment has a segment manager who is directly accountable to the chief operating decision maker for its financial performance. 2. If more than one set of organizational units exists, each organizational unit is considered an operating segment even if 3. If segment managers exist for two or more overlapping sets of organizational units, the nature of the business activities must be considered.

1. An operating segment has a segment manager who is directly accountable to the chief operating decision maker for its financial performance. 3. If segment managers exist for two or more overlapping sets of organizational units, the nature of the business activities must be considered.

Which of the following items of information are required to be included in interim reports for each operating segment? I. Revenues from external customers II. Segment profit or loss III. Reconciliation of segment profit or loss to the enterprise's total income before taxes IV. Intersegment revenues

1. Revenues from external customers 2. Segment profit or loss 3. Reconciliation of segment profit or loss to the enterprise's total income before taxes 4. Intersegment revenues

Which of the following is not necessarily true for an operating segment? a. Segment revenues from external sales are 5 percent or more of combined segment revenues from external sales. b. Segment assets are 10 percent or more of combined segment assets. c. Segment profit or loss is 10 percent or more of consolidated net income. d. Segment liabilities are 10 percent or more of consolidated liabilities.

An operating segment regularly generates a profit from its normal ongoing operations.

Which of the following statements is true regarding the identifying factors used to determine which components of a business are operating segments? a. Operating segments are components of an enterprise that engage in business activities and from which it only recognizes revenues. b. The corporate controller reviews each operating segment's operating results to assess performance. c. A component may be classified as an operating segment without revenues assuming that it generates a material level of expense. d. An organizational unit can be an operating segment even if all of its revenues or expenses result from transactions with other segments. e. All parts of a company must be included in an operating segment.

An organizational unit can be an operating segment even if all of its revenues or expenses result from transactions with other segments.

Which of the following is not true for an operating segment according to the U.S. GAAP? a. Discrete financial information generated by the internal accounting system is available. b. The segment recognizes revenues and incurs expenses. c. The segment recognizes revenues and incurs expenses. d. The segment is regularly reviewed by a chief decision maker to assess performance decisions. e.An organizational unit cannot be an operating segment if all of its operating transactions are only with other segments of the organization.

An organizational unit cannot be an operating segment if all of its operating transactions are only with other segments of the organization.

In considering interim financial reporting, how does the U.S. GAAP requires that such reporting be viewed? a. As reporting for an integral part of an annual period b. As a special type of reporting that need not follow generally accepted accounting principles c. As useful only if activity is evenly spread throughout the year, making estimates unnecessary d. As reporting for a basic accounting period

As reporting for an integral part of an annual period

Which of the following is reported for interim financial reports using the integral approach? A. Bonus expense. B. Gross profit. C. Cash basis accounting. D. Current market value.

Bonus expense.

Which of the following statements is not true under U.S. GAAP? a. Companies must combine individual foreign countries into geographic areas to comply with the geographic area disclosure requirements. b. Companies that define their operating segments by product lines must provide revenue and asset information for the domestic country, for all foreign countries in total, and for each material foreign country. c. Companies must disclose total assets, investment in equity method affiliates, and total expenditures for long-lived assets by operating segment. d. Operating segments can be determined by looking at a company's organization chart. a. The chief operating decision maker regularly reviews an operating segment to assess performance and make resource allocation decisions. b. Discrete financial information generated by the internal accounting system is available for an operating segment. c. An operating segment e

Companies must combine individual foreign countries into geographic areas to comply with the geographic area disclosure requirements

Which of the following statements is false concerning the number of operating segments that should be disclosed? a. At least 75 percent of total company sales made to outsiders should be presented. b. Even though an operating segment has been reportable in the past and is of continuing significance, it must meet at least one of the three reporting tests to report separately in the current year. c. If the 75 percent rule is not met by the results of applying all three reporting tests, additional segments must be disclosed separately despite their failure to satisfy even one of the three quantitative thresholds. d. If an operating segment qualifies for disclosure in the current year, prior period segment data presented for comparative purposes must be restated to reflect the newly reportable segment as a separate segment.

Even though an operating segment has been reportable in the past and is of continuing significance, it must meet at least one of the three reporting tests to report separately in the current year.

How should material seasonal variations in revenue be reflected in interim financial statements? a. The seasonal nature should be disclosed, and the interim report should be supplemented with a report on the 12-month period ended at the interim date for both the current and preceding years. b. No attempt should be made to reflect seasonality in interim financial statements. c. The seasonal nature should be reflected by providing pro forma financial statements for the current interim period. d. The seasonal nature should be disclosed, but no attempt should be made to reflect the effect of past seasonality on financial statements.

The seasonal nature should be disclosed, and the interim report should be supplemented with a report on the 12-month period ended at the interim date for both the current and preceding years

When defining a reportable segment, which of the following conditions would be sufficient to allow a company to combine two operating segments for purposes of testing a. The products sold by each segment are produced in the same plant. b. Both segments have several customers in common. c. The segments may sell different products, but they have a similar economic environment and similar business activities. d. Both segments are required to adhere to U.S. Department of Labor regulations regarding immigration laws.

The segments may sell different products, but they have a similar economic environment and similar business activities.

Niceville Company pays property taxes of $100,000 in the second quarter of the year. Which of the following statements is true with respect to the recognition of property tax expense in interim financial statements? a. Under U.S. GAAP, the company would report property tax expense of $33,333 in each of the second, third, and fourth quarters of the year. b. Under U.S. GAAP, the company would report property tax expense of $100,000 in the second quarter of the year. c. Under IFRS, the company would report property tax expense of $25,000 in the first quarter of the year. d. Under IFRS, the company would report property tax expense of $100,000 in the second quarter of the year.

Under IFRS, the company would report property tax expense of $100,000 in the second quarter of the year.

For a U.S.-based company, which of the following would be an acceptable presentation of countries for providing information by geographic area?

United States, Mexico, Japan, Spain, All Other Countries