Advanced-ch.12 HW
Which of the following in not true regarding the recognition of costs that benefit more than one interim reporting period? Select one: a. Costs are generally recognized as expenses in the periods in which they are incurred. b. The estimated annual cost of property taxes that can be reliably estimated should be apportioned equally to interim reporting periods. c. Even though the entire cost of advertising may be recognized as an expense in the annual reporting period, that expense is allocated over the interim reporting periods that benefit from the expenditure. d. The cost of quantity discounts should be recognized in the interim period, even if the annual purchase level has not year been made if the company expects that the annual sales volume will be sufficient for the customer to receive the discount.
Accounting for costs that benefit more than one interim reporting periodWhen a cost that is expensed for annual reporting purposes clearly benefits two or more interim periods, each interim period should be charged for an appropriate portion of the annual cost by the use of accruals or deferrals (FASB ASC 270-10-45-8). The correct answer is: Costs are generally recognized as expenses in the periods in which they are incurred.
Which of the following is not true regarding the treatment of inventories in interim financial statements: Select one: a. Companies should always recognize the cost of the variances in the interim reporting period. b. In the lower of cost or market test, if the decline in the market value of the inventory is expected to be restored by year-end, the decline is not recognized at the interim date. c. LIFO liquidation should not be recognized if the company expects the inventory layer giving rise to the liquidation profit to be replaced. d. Companies may not take a physical inventory other than at year-end.
Accounting for inventories in interim financial statementsIf cost variances are planned and expected to be absorbed by the end of the annual period, the company should not recognize the cost of the variance in the interim reporting period. The correct answer is: Companies should always recognize the cost of the variances in the interim reporting period.
Which of the following is not one of the factors to consider in determining whether a business entity meets the definition of a reportable segment: Select one: a. It engages in business activities from which it may earn revenues and incur expenses. b. Its operating results are regularly reviewed by the entity's chief operating decision maker. c. It engages in sales activities with unaffiliated entities. d. Its discrete financial information is available.
Determination of reportable operating segmentsEngaging in sales with unaffiliated entities is not one of their requirements to determine whether a business entity meets the definition of a reportable segment. The correct answer is: It engages in sales activities with unaffiliated entities.
Assume that your company determines that the value of its inventories has declined in the second quarter, but you assume that the market price will return to previous levels by the end of the year so that no loss will be recognized. At the end of the year, however, the market price reversal did not occur. When should the loss be reported in your company's interim income statements? Select one: a. In the second quarter only b. Ratably over the third and fourth quarters c. Ratably over the second, third, and fourth quarters d. In the fourth quarter only
Reporting inventory losses in interim financial statements If the market price reversal does not occur, the company should compute its gross profit for the interim 4th quarter reporting period. The correct answer is: In the fourth quarter only
Selected data for an operating segment of a business are to be separately reported when the revenue of the segment exceeds 10% of the: Select one: a. Total revenue from unaffiliated transactions b. Separate tests for combined revenue from all segments reporting profits and losses. c. Total revenue of all the entity's operating segments d. Combined net income of all segments reporting profits
Determination of reportable operating segmentsSelected data for an operating segment of a business are to be separately reported when its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 percent or more of the combined revenue, internal and external, of all operating segments. The correct answer is: Total revenue of all the entity's operating segments
Which of the following operating segments should be identified as a reportable segment given the information below? A: (75,000) B. 67,500 C: 675,000 D. (300,000)
Determination of reportable operating segmentsThe combined operating profit of all operating segments that did not report a loss is $742,500 ($67,500 + $675,000) and the combined reported loss of all operating segments that did report a loss is $375,000 ($75,000 + $300,000). The operating profit threshold of $742,500 is greater and the 10% threshold is $74,250. Segments A, C and D exceed this amount in absolute value. The correct answer is: A, C and D
Two or more operating segment may be aggregated into a single operating segment if the segments have similar economic characteristics, and if the segments are similar. Which of the following is not one of the factors used to determine similarity? Select one: a. The type or class of customer for their products and services b. The nature of the processes c. The nature of the products and services d. Employment of many of the same people across the segments
Determination of reportable operating segmentsTwo or more operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, and if the segments are similar in each of the following areas (FASB ASC 280-10-50-11): a. The nature of the products and services, b. The nature of the production processes, c. The type or class of customer for their products and services, d. The methods used to distribute their products or provide their services, e. If applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities. The correct answer is: Employment of many of the same people across the segments
Which of the following is a required disclosure regarding external customer? Select one: a. The name of the customer(s) b. Information on major customers is not required in segment reporting c. The fact that transactions with the customer(s) constitute more than 10% of total revenues d. The dollar amount of sales to the customer(s)
Disclosure about external customers Companies must disclose information about the extent of their reliance on major customers if revenues from transactions with a single external customer amount to 10% or more of the company's total revenues (FASB ASC 280-10-50-42). The company does not need to disclose, however, the identity of a major customer or the amount of revenues that each segment reports from that customer. The correct answer is: The fact that transactions with the customer(s) constitute more than 10% of total revenues
Which of the following is true with respect to "accounting changes"? Select one: a. The effects of changes in accounting principles are reflected only prospectively from the date of the change. b. Companies only record the effects of the change in accounting principles in the annual financial statements. c. FASB ASC 250 requires that the change in accounting principles be made only in the most recent year presented in the comparative financial statements, with a cumulative adjustment to the beginning balance of assets and liabilities affected by the change in the earliest reporting period, and an offsetting adjustment to Retained Earnings for that year. d. FASB ASC 250 requires that the change in accounting principles be made retrospectively, with a cumulative adjustment to the beginning balance of assets and liabilities affected by the change in the earliest period reported, and an offsetting adjustment to Retained Earnings.
Recording the effects of accounting changesWhenever a change in accounting principles is made, FASB ASC 250, "Accounting Changes and Error Corrections," requires that the change be made retrospectively (i.e., financial statements for each individual prior period presented shall be adjusted to reflect the period-specific effects of applying the new accounting principle), with a cumulative adjustment to the beginning balance of assets and liabilities affected by the change in the earliest period reported, and an offsetting adjustment to Retained Earnings (FASB ASC 250-10-45-5). The correct answer is: FASB ASC 250 requires that the change in accounting principles be made retrospectively, with a cumulative adjustment to the beginning balance of assets and liabilities affected by the change in the earliest period reported, and an offsetting adjustment to Retained Earnings.
