BA 458 Chapter 8

On March 15, Calloway, Inc., paid property taxes of $480,000 for the calendar year. How much of this expense should Calloway's income statement reflect for the quarter ending March 31? a.) $0 b.) $40,000 c.) $120,000 d.) $480,000

$120,000

In March of the current year, Mooney Company estimated its year-end executive bonuses to be $800,000. The executive bonus paid in the previous year was $950,000. What amount of bonus expense, if any, should Mooney recognize in determining net income for the first quarter of the current calendar year? a.) $0 b.) $237,500 c.) $800,000 d.) $200,000

$200,000

Rouge Company's $250,000 net income for the quarter ended September 30 included the following after-tax items: A $20,000 cumulative effect loss resulting from a change in inventory valuation method made on September 1. $0 of the $60,000 annual property taxes paid on February 1. For the quarter ended September 30, the amount of net income that Rouge should report is a.) $235,000 b.) $270,000 c.) $250,000 d.) $255,000

$255,000

Livro Company has three operating segments with the following information: Sales to outsiders: Books $12,000, Caledars $9,000, Bags $8,000 Intersegment transfers: Books $1,000, Calendars $500, Bags $1,500 In addition, corporate headquarters generates revenues of $2,000. What is the minimum amount of revenue that each of these segments must generate to be considered separately reportable? a.) $3,400 b.) $3,300 c.) $3,200 d.) $2,900

$3,200

Nottage Company has four separate operating segments: Sales to outsiders: East $188,000, West $126,000, North $65,000 Intersegment transfers: East $16,000, West $6,000, North $13,000 What revenue amount must one customer generate before it must be identified as a major customer? a.) $42,200 b.) $39,600 c.) $46,500 d.) $49,200

$42,200

Baton Company estimates that the amounts for total depreciation expense for the year ending December 31 will be $120,000 and for year-end bonuses to employees will be $200,000. What total amount of expense relating to these two items should Baton report in its quarterly income statement for the three months ended March 31? a.) $50,000 b.) $0 c.) $30,000 d.) $80,000

$80,000

On March 15, Calloway, Inc., paid property taxes of $480,000 for the calendar year. The journal entry at March 15 to record the payment of property taxes would include which of the following? a.) A debit to Property Tax Expense of $480,000. b.) A credit to Prepaid Property Taxes of $40,000. c.) A credit to Cash of $120,000. d.) A debit to Prepaid Property Taxes of $360,000.

A debit to Prepaid Property Taxes of $360,000.

Which of the following is not necessarily true for an operating segment? a.) An operating segment earns revenues and incurs expenses. b.) Discrete financial information generated by the internal accounting system is available for an operating segment. c.) An operating segment regularly generates a profit from its normal ongoing operations. d.) The chief operating decision maker regularly reviews an operating segment to assess performance and make resource allocation decisions.

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

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

As reporting for an integral part of an annual period.

Which of the following statements is not true under U.S. GAAP? a.) Companies must disclose total assets, investment in equity method affiliates, and total expenditures for long-lived assets by operating segment. b.) Companies must combine individual foreign countries into geographic areas to comply with the geographic area disclosure requirements. c.) Operating segments can be determined by looking at a company's organization chart. d.) 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.

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

What information about revenues by geographic area should a company present? a.) No disclosure of revenues from foreign operations need be reported. b.) Disclose as a combined amount sales to unaffiliated customers and intra-entity sales between geographic areas. c.) Disclose separately the amount of sales to unaffiliated customers but not the amount of intra-entity sales between geographic areas. d.) Disclose separately the amount of sales to unaffiliated customers and 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 statements concerning U.S. GAAP is true? a.) Does not require a reconciliation of segment assets to consolidated assets. b.) Requires geographic area information to be disclosed in interim financial statements. c.) Requires disclosure of a major customer's identity. d.) Does not require segment information to be reported in accordance with generally accepted accounting principles.

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

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

Gross revenues.

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

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

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

Liabilites

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

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.) Interest income. b.) Depreciation and amortization expense. c.) Interest expense. d.) Research and development expense.

Research and development expense.

Which of the following items is required to be disclosed by geographic area? a.) Revenues from external customers. b.) Profit or loss. c.) Total assets. 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 of its consumer products line of goods. b.) Revenues generated from export sales. c.) Revenues generated by its Japanese subsidiary. d.) Revenues generated from sales to Walmart.

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.) Revenues from external customers. b.) Segment profit or loss. c.) Segment assets. d.) Intersegment revenues.

Segment assets

Which of the following is a criterion for determining whether an operating segment is separately reportable? a.) Segment profit or loss is 10 percent or more of consolidated net income. b.) Segment assets are 10 percent or more of combined segment assets. c.) Segment liabilities are 10 percent or more of consolidated liabilities. d.) Segment revenues from external sales are 5 percent or more of combined segment revenues from external sales.

Segment assets are 10 percent or more of combined segment assets.

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

The operating segment making sales to the major customer.

How should material seasonal variations in revenue be reflected in interim financial statements? a.) The seasonal nature should be reflected by providing pro forma financial statements for the current interim period. b.) No attempt should be made to reflect seasonality in interim financial statements. c.) The seasonal nature should be disclosed, but no attempt should be made to reflect the effect of past seasonality on financial statements. d.) 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.

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.

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 statements is true for 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 IFRS, the company must base operating segments on product and service lines of business. b.) Under U.S. GAAP, the company must base operating segments on geographic areas. c.) Under IFRS, the company must refer to the core principle of IFRS 8 to determine operating segments. d.) Under U.S. GAAP, the company may choose to define operating segments on the basis of either products and services or geographic areas.

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

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 $100,000 in the second quarter of the year. b.) 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. 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? a.) United States, Mexico, Japan, Spain, All Other Countries. b.) Europe, Asia, Africa. c.) Canada, Germany, France, All Other Countries. d.) United States, Canada and Mexico, Germany, Italy.

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