ACC 4100 - Chapter 8

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

b. Revenues from external customers.

What information about revenues by geographic area should a company present? a. Disclose separately the amount of sales to unaffiliated customers and the amount of intra-entity sales between geographic areas. 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. No disclosure of revenues from foreign operations need be reported.

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

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

c. The operating segment making sales to the major customer. With regard to major customers, U.S. GAAP (FASB ASC 280) only requires disclosure of the total amount of revenues from each such customer and the identity of the operating segment or segments reporting the revenues.

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 all three must be met. b. Four tests are applied, and only one must be met. c. Three tests are applied, and only one must be met. d. Four tests are applied, and all four must be met.

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

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. $0 b. $30,000 c. $50,000 d. $80,000

d. $80,000 Depreciation $120,000 x 1/4 = $30,000 Bonus $200,000 x 1/4 = + $50,000 = $80,000

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

a. Liabilities

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

b. Research and development expense.

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. $250,000 c. $255,000 d. $270,000

c. $255,000 Income as reported $250,000 Add: Cumulative effect loss (handled through adjustment of retained earnings balance at the beginning of the year) 20,000 Less: ¼ of property taxed paid on February 1 (15,000) = $ 255,000

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. United States, Canada and Mexico, Germany, Italy. c. Europe, Asia, Africa. d. Canada, Germany, France, All Other Countries.

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

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. $200,000 c. $237,500 d. $800,000

b. $200,000 Bonus $800,000 x 1/4 = $200,000

Livro Company has three operating segments with the following information: Sales to outsiders: Books = $12,000 | Calendars = $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. $2,900 b. $3,200 c. $3,300 d. $3,400

b. $3,200 Sales to outsiders $29,000 Intersegment transfers + 3,000 Combined segment revenues = $32,000 10% criterion x 10% Minimum = $ 3,200

Tristan, Inc., uses the LIFO cost-flow assumption to value inventory. It began the current year with 2,000 units of inventory carried at LIFO cost of $20 per unit. During the first quarter, it purchased 8,000 units at an average cost of $40 per unit and sold 9,500 units at $60 per unit. Assume the company does not expect to replace the units of beginning inventory sold; it plans to reduce inventory by year-end to 500 units. What amount of cost of goods sold should be recorded for the quarter ended March 31? a. $335,000 b. $350,000 c. $380,000 d. $387,500

b. $350,000 8,000 units x $40 = $320,000 1,500 units x $20 = + 30,000 9,500 units = $350,000

Howard Corporation has six different operating segments reporting the following operating profit and loss figures: A: $80,000 profit | B: $140,000 loss | C: $100,000 profit | D: $440,000 loss | E: $50,000 profit | F: $170,000 profit With respect to the profit or loss test, which of the following statements is not true? a. A is a reportable segment based on this one test. b. C is not a reportable segment based on this one test. c. E is not a reportable segment based on this one test. d. F is a reportable segment based on this one test.

b. C is not a reportable segment based on this one test. Total operating losses of $580,000 (B and D) are larger than total operating profits of $400,000 (A, C, E and F). Thus, based on the 10 percent criterion, any segment with a profit or loss of $58,000 or more must be separately disclosed. Other than E, each segment meets this threshold.

Nottage Company has four separate operating segments: Sales to outsiders: East = $188,000 | West = $126,000 | North = $65,000 | South = $43,000 Intersegment transfers: East = 16,000 | West = 6,000 | North = 13,000 | South = 8,000 What revenue amount must one customer generate before it must be identified as a major customer? a. $39,600 b. $42,200 c. $46,500 d. $49,200

b. $42,200 Revenues from a single customer must be disclosed if the amount is 10 percent or more of consolidated sales. Consolidated sales only includes sales to outsiders; intersegment sales are eliminated. Consolidated sales (combined sales to outsiders) $422,000 10% criterion x 10% Minimum = $ 42,200

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

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

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. Intersegment revenues. c. Segment assets. d. Segment profit or loss.

c. Segment assets. If there has been a material change from the last annual report, total assets, but not individual assets, for each operating segment must be disclosed.

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 IFRS, the company would report property tax expense of $100,000 in the second quarter of the year. c. 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. d. Under IFRS, the company would report property tax expense of $25,000 in the first quarter of the year.

b. Under IFRS, the company would report property tax expense of $100,000 in the second quarter of the year. Under U.S. GAAP, the company should report property tax expense of $25,000 in each quarter of the year. Under IFRS, the company should report the entire property tax expense of $100,000 in the second quarter of the year.

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

c. $120,000 Property taxes $480,000 x 1/4 = $120,000

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

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

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

d. Gross revenues.

Which of the following statements concerning U.S. GAAP is true? a. Does not require segment information to be reported in accordance with generally accepted accounting principles. b. Does not require a reconciliation of segment assets to consolidated assets. c. Requires geographic area information to be disclosed in interim financial statements. d. Requires disclosure of a major customer's identity.

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

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. The seasonal nature should be disclosed, but no attempt should be made to reflect the effect of past seasonality on financial statements. c. The seasonal nature should be reflected by providing pro forma financial statements for the current interim period. d. No attempt should be made to reflect seasonality 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.

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 useful only if activity is evenly spread throughout the year making estimates unnecessary. c. As reporting for a basic accounting period. d. As reporting for an integral part of an annual period.

d. As reporting for an integral part of an annual period.

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

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

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 ratably over all four quarters, with the first quarter being restated. c. Recognized in the second quarter. d. Disclosed by footnote only in the second quarter.

c. Recognized in the second quarter.

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 by its Japanese subsidiary. c. Revenues generated from export sales. d. Revenues generated from sales to Walmart.

c. Revenues generated from export sales.

What is the minimum number of operating segments that must be separately reported? a. Ten. b. Segments with at least 75 percent of revenues as measured by the revenue test. c. At least 75 percent of the segments must be separately reported. d. Segments with at least 75 percent of the revenues generated from outside parties.

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

Which of the following statements is not true under U.S. GAAP? a. Operating segments can be determined by looking at a company's organization chart. b. Companies must combine individual foreign countries into geographic areas to comply with the geographic area disclosure requirements. c. 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. d. 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.

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 Cash of $120,000. c. A debit to Prepaid Property Taxes of $360,000. d. A credit to Prepaid Property Taxes of $40,000.

c. A debit to Prepaid Property Taxes of $360,000. Dr. Property tax expense 120,000 Dr. Prepaid property taxes 360,000 Cr. Cash 480,000

Hyams Corp. engages solely in manufacturing operations. The following data pertain to the operating segments for the current year: [operating segment] [total revenues] [profit (loss)] [assets @ 12/31] [U] [$13,000,000] [2,000,000] [15,000,000] [V] [9,500,000] [1,200,000] [11,000,000] [W] [5,500,000] [(1,000,000)] [3,000,000] [X] [3,000,000] [600,000] [7,500,000] [Y] [2,000,000] [400,000] [4,500,000] [Z] [2,000,000] [300,000] [2,000,000] total: [$35,000,000] [$3,500,000] [$43,000,000] In its segment information for the current year, how many reportable segments does Hyams have? a. Three b. Four c. Five d. Six

c. Five Five segments pass any one of the tests and are reportable: U, V, W, X, Y [Revenue Test] Combined segment revenues $35,000,000 10% criterion x 10% Minimum = $ 3,500,000 Segments meeting test—U, V, W [Profit/Loss Test] Total segment profits of $4,500,000 (U, V, X, Y, Z) is larger than the total segment loss of $1,000,000 (W). This test is applied based on total combined segment profit. Combined segment profit $4,500,000 10% criterion x 10% Minimum = $ 450,000 Segments meeting test—U, V, W, X [Asset Test] Combined segment assets $43,000,000 10% criterion x 10% Minimum = $ 4,300,000 Segments meeting test—U, V, X, Y

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

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

Tristan, Inc., uses the LIFO cost-flow assumption to value inventory. It began the current year with 2,000 units of inventory carried at LIFO cost of $20 per unit. During the first quarter, it purchased 8,000 units at an average cost of $40 per unit and sold 9,500 units at $60 per unit. Assume the company expects to replace the units of beginning inventory sold in April at a cost of $45 per unit and expects inventory at year-end to be between 2,100 and 2,500 units. What amount of cost of goods sold should be recorded for the quarter ended March 31? a. $335,000 b. $350,000 c. $380,000 d. $387,500

d. $387,500 8,000 units x $40 = $320,000 1,500 units x $45 = + 67,500 9,500 units = $387,500

Chambers Company has seven operating segments but only four (One, Two, Three, and Four) are of significant size to warrant separate disclosure. As a whole, the segments generated revenues of $1,010,000 ($780,000 + $230,000) from sales to outside customers. In addition, the segments had $300,000 in intersegment sales ($250,000 + $50,000). [see chart pg.395] Which of the following statements is true? a. A sufficient number of segments is being reported because those segments have $1,030,000 in total sales of a total of $1,310,000 for the company as a whole. b. Not enough segments are being reported because those segments have $780,000 in outside sales of a total of $1,010,000 for the company as a whole. c. Not enough segments are being reported because those segments have $1,030,000 in total revenues of a total of $1,310,000 for the company as a whole. d. A sufficient number of segments is being reported because those segments have $780,000 in outside sales of a total of $1,010,000 for the company as a whole.

d. A sufficient number of segments is being reported because those segments have $780,000 in outside sales of a total of $1,010,000 for the company as a whole. The test to verify that a sufficient number of industry segments is being disclosed is based on revenues generated from unaffiliated customers (outside sales). The four segments that are to be separately disclosed have outside sales of $780,000 out of a total for the company of $1,010,000. Since this portion is 77.2 percent of the company's total, the 75 percent criterion established by U.S. GAAP has been met.