Chapter 8

GAAP requires US corp to disclose everything but

COGS

What is not a criteria management should consider in determining whether bus activities and environments of an op segment are similar

Geo location of operations

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?

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

How should revenues be recognized in interim periods?

In the same way as they are recognized on an annual basis.

How should a change from one generally accepted accounting principle to another accepted principle be handled in a third-quarter income statement?

Adjust financial statements for each prior period presented to reflect the effects of the new principle in those reported periods.

A company that generates reports by geo region and product line must consider addtional criteria in indentifying operating segments when there are multiple sets of reports

An operating segment has a seg mgr directly accountable to chief operating decision maker for fin performance If segment mgrs exist for two or more overlapping org units, nature of business activities msut be considered

Which of the following is a criterion for determining whether an operating segment is separately reportable?

An operating segment's assets are 10 percent or more of combined segment assets

Which of the following is not true for an operating segment according to U.S. GAAP?

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

Which of the following is not correct regarding inventory procedures reported in an interim financial statement?

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

The following items are required to be disclosed for each operating segment except:

Factors used to allocate company-wide expenses.

Which of the following is not a required disclosure in an interim financial report?

Gross profit.

Which of the following are required to be disclosed in interim reports?

Gross revenues.

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?

Different products but similar production process

What are the two approaches that can be followed in preparing interim reports?

Discrete and integral.

Which of the following is reported for interim financial reports using the discrete approach?

Extraordinary gains.

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

Which of the following costs require similar treatment to Property Tax Expense in an interim financial report?

1) Annual major repairs. 2) Advertising expense. 3) Bonus expense, if estimable. 4) Quantity discounts based on annual sales.

Cement Company, Inc. began the first quarter with 1,000 units of inventory costing $25 per unit. During the first quarter, 3,000 units were purchased at a cost of $40 per unit, and sales of 3,400 units at $65 per units were made. During the second quarter, the company expects to replace the units of beginning inventory sold at a cost of $45 per unit. Cement Company uses the LIFO method to account for inventory. The amount of gross profit for the first quarter is:

83000

According to International Financial Reporting Standards (IFRS), all of the following are part of minimum components of interim financial reporting except:

A condensed statement of stockholders' equity.

How should contingencies be reported in an interim report?

Disclosed the same way as they are disclosed in annual reports.

What information does U.S. GAAP require to be disclosed for a major customer?

The operating segment reporting sales to the customer.

Which of the following is not a required disclosure in an interim financial report?

Gains on sales of major equipment.

Three reasons for segment reporting

•Better understand enterprise performance •Better assess its prospect of future cash flow •Make more informed judgments about enterprise

US company reports revenue and long lived assets in

US All other country total Material countries

Segment Reporting

to provide info about different business activities in which an enterprise engages and the different economic environments to help statement users

Segments only if at least 75% of total company consolidated sales made to outsiders

If not must disclose separately Segment sales/total sales Must segment until reach 75%

Explanation of Management

Must explain measurements and differences between segment and consolidated revenues, losses and assets

How are extraordinary gains reported in a third quarter interim financial report?

Recognized in the third quarter.

Which of the following must be disclosed by a geographic segment according to U.S. GAAP?

Revenues from external customers.

Which of the following would be an acceptable grouping for a U.S. company to provide information by geographic area?

United States, All Other Countries.

According to U.S. GAAP, which of the following would be an acceptable grouping by a U.S. company for presentation of information by geographic area?

United States, Canada, Mexico, Germany.

What is the appropriate treatment in an interim financial report for inventory that has cost below market value?

There is no loss to report.

Which of the following is reported for interim financial reports using the integral approach?

Bonus expense.

Which of the following operating segment disclosures is not required by U.S. GAAP?

Liabilities.

For companies that provide quarterly reports, how is the fourth quarter reported?

No fourth-quarter report is required.

Betsy Kirkland, Inc. incurred a flood loss during the first quarter of 2013 that is deemed both unusual and infrequent. 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:

Record the loss in the first quarter, but not as an extraordinary loss, and disclose the loss in a separate note or in the income statement as a separate line item.

Vapor Corporation has a fan products operating segment. Which of the following items does Vapor not have to report for this segment?

Research and development expense.

Which of the following must be disclosed for all reportable segments in notes to fin statements?

Revenue from external customers Total segment assets

Which of the following statements is true regarding the reporting of revenues in an interim report?

Revenues should be recognized in interim periods in the same way as they are on an annual basis.

All of the following are required to be reported in interim financial statements for a material operating segment except:

Segment assets.

What is the appropriate treatment in an interim financial report for a LIFO liquidation?

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.

What is the appropriate treatment in an interim financial report for inventory that has market value below cost?

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

How should seasonal revenues be reported in an interim financial statement?

The seasonal nature should be disclosed, and a supplemental report for the 12-month period ended at the interim date should supplement the interim report.

What is the appropriate treatment in an interim financial report for variances arising from the use of a standard costing system?

The variances expected to be absorbed by year-end should not be reflected in the interim statement.