Chapter 8

Which of the following operating segment disclosures is not required by U.S. GAAP? A)Interest expense.B)Intersegment sales.C)Unusual items.D)Depletion.E)Liabilities.

E)Liabilities.

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

Research and development expense

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

Revenues from external customers

Generally Accepted Accounting Principles require a US corporation to disclose the following disaggregated information for each operating segment, except: A. revenues from external customers B. unusual items C. COGS D. Depreciation expense E. Intersegment revenues

C. COGS

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

E)Discontinued operations

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? Revenues generated by its Japanese subsidiary Revenues generated from export sales Revenues generated from sales to Walmart Revenues generated from sales of its consumer products line of goods

Revenues generated from export sales

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

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

which of the following is not one of the criteria management should consider in determining whether business activities and environments of an operating segment are similar?a. geographical location of the operationsb. nature of the production processc. distribution methodsd. nature of the regulatory environment if applicablee. type or class of customer

a. geographical location of the operations

Hyams Corp. engages solely in manufacturing operations. The following data pertain to the operating segments for the current year: Op Seg Total Rev Profit Assets 12/31 U$13 mill $2 mill $15 mill 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 mill $3,500,000 $43 mill In its segment information for the current year, how many reportable segments does Hyams have? three four five six

five

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

As reporting for an integral part of an annual period

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 E) There is no requirement of information to disclose for operating segments.

D) I and II only

Which of the following must be disclosed by a geographic segment according U.S. GAAP? A)Operating profit or loss.B)Gross profit.C)Total assets.D)Revenues from external customers.E)Revenues from internal customers.

D)Revenues from external customers.

Which of the following items of information are required to be included in interim reports for each operating segment? Revenues from external customers Segment profit or loss Reconciliation of segment profit or loss to the enterprise's total income before taxesIntersegment revenues A)I and III only.B)I and II only.C)I, II and III.D)II and III only.E)I, II, III, and IV.

E)I, II, III, and IV.

Which of the following would be an acceptable grouping for a U.S. company to provide information by geographic area? A)United States, All Other Countries.B)United States, Europe, Taiwan.C)United States, Asia, Germany.D)United States, Central America, Mexico, Germany.E)South America, Spain, All Other Countries

A)United States, All Other Countries.

How should revenues be recognized in interim periods? A. In the same way as they are recognized on an annual basis. B. On the cash basis. C. On an annualized basis. D. On a seasonal basis. E. There are no revenues recognized in interim periods.

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

Vapor Corporation has a fan products operating segment. With respect to the following, which is Vapor not required to report for this segment? A)Depreciation expense.B)Amortization expense.C)Research and development expense.D)Interest expense.E)Interest income.

C)Research and development expense.

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.E)There is no loss to report

C)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 variances arising from the use of a standard costing system? A)The variances are always ignored for interim reporting.B)The variances should always be reflected in gross profit on an interim income statement.C)The variances expected to be absorbed by year-end should not be reflected in the interim statement.D)The variances should always be reflected in the interim income statement but not the interim balance sheet.E)The variances should only be reflected in the interim balance sheet.

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

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

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

Which of the following is not true for an operating segment according to 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 is regularly reviewed by a chief decision maker to assess performance decisions.D)The segment is regularly reviewed by a chief decision maker to make resource allocations.E)An organizational unit cannot be an operating segment if all of its operating transactions are only with other segments of the organization

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

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 always result in replacement cost valuation of ending inventory on the interim income statement but not the interim balance sheet.E)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.

E)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.

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

Gross revenues

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

Liabilities.

Livro Company has three operating segments with the following information: Books Calendars Bags Sales 2 outs$8,400 $4,260 $6,400 Interseg transf 640 1,080 1,300 In addition, corporate headquarters generates revenues of $1,000. What is the minimum amount of revenue that each of these segments must generate to be considered separately reportable? (Round your answer to the nearest whole dollar.) $2,006. $2,308. $2,208. $1,906.

2,208 Sales to outs $19,060 Inters trans 3,020 Comb seg revs $22,080 10% criterion × 10% Minimum$2,208

Which one of the following items is not required to be disclosed for each operating segment? A) Factors used to identify operating segments. B) Products and services from which each segment derives its revenues. C) Revenues from external customers. D) Factors used to allocate company-wide expenses. E) Revenues from transactions with other operating segments.

D) Factors used to allocate company-wide expenses.

What are the two approaches that can be followed in preparing interim reports? A)Indiscrete and terminal.B)Discrete and terminal.C)Metric and integral.D)Discrete and integral.E)Discrete and metric.

D)Discrete and integral.

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 recorded in the interim period in which cost drops below net realizable value if the loss is considered permanent.D)The loss should be ignored for interim reporting purposes.E)There is no loss to report.

E)There is no loss to report.

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

Segment assets

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

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? The geographic area in which sales to the major customer are made The percentage of total sales derived from the major customer The operating segment making sales to the major customer The identity of the major customer

The operating segment making sales to the major customer

The following items are required to be disclosed for each operating segment except: A) Factors used to allocate company-wide pension expense. B) Revenues from transactions with other operating segments. C) Interest revenue and interest expense. D) Depreciation, depletion, and amortization expense. E) Revenues from external customers.

A) Factors used to allocate company-wide pension expense.

Which of the following is a criterion for determining whether an operating segment is separately reportable? A)An operating segment's assets are 10 percent or more of combined segment assets.B)An operating segment's assets are 10 percent or more of consolidated assets.C)An operating segment's assets are 10 percent or more of combined segment liabilities.D)An operating segment's assets are 10 percent or more of consolidated liabilities.E)An operating segment's assets are 10 percent or more of corporate assets.

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

Nottage Company has four separate operating segments: East West North South Sales 2 outs $127K $83K $97K $79K Inters trans3K 27K 13,400 18,400 What revenue amount must one customer generate before it must be identified as a major customer? $38,600. $57,900. $47,680. $42,460.

$38,600. 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 $386,000 10% criterion × 10% Minimum$38,600

Which tests must a company use to determine which operating segments require separate disclosure? A) Revenue test and asset test. B) Revenue test, profit or loss test, and asset test. C) Revenue test and profit or loss test. D) Profit or loss test and asset test. E) Revenue test, asset test, and liability test.

B) Revenue test, profit or loss test, and asset test.

What information does U.S. GAAP require to be disclosed for a major customer? A)The identity of the customer.B)The operating segment reporting sales to the customer.C)The geographic area of the customer.D)The specific products or services purchased by the customer.E)The length of time the customer has been a customer of the company

B)The operating segment reporting sales to the customer.

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. A)1 and 2B)1, 2, and 3C)1, 2, and 4D)2, 3, and 4E)1, 2, 3, and 4

E)1, 2, 3, and 4

In determining whether a particular operating segment is of significant size to warrant disclosure, which of the following is true? Three tests are applied, and only one must be met. Three tests are applied, and all three must be met. Four tests are applied, and all four must be met. 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 reported for interim financial reports using the integral approach? A)Bonus expense.B)Gross profit.C)Cash basis accounting.D)Current market value.E)Segment level management compensation.

A)Bonus expense.

Which of the following is not one of the criteria management should consider in determining whether business activities and environments of an operating segment are similar? A)The geographical location of the operations. B)The nature of the production process. C)The distribution methods. D)The nature of the regulatory environment, if applicable. E)The type or class of customer

A)The geographical location of the operations.

Which of the following is not necessarily true for an operating segment? Discrete financial information generated by the internal accounting system is available for an operating segment. An operating segment regularly generates a profit from its normal ongoing operations. An operating segment earns revenues and incurs expenses. 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.

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. E) The practical limit to the number of operating segments is 10.

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.

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?An operating segment has a segment manager who is directly accountable to the chief operating decision maker for its financial performance.If more than one set of organizational units exists, each organizational unit is considered an operating segment even if there is only one set for which segment managers are held responsible.If segment managers exist for two or more overlapping sets of organizational units, the nature of the business activities must be considered. I, II, and III. B) I and III only. C) I and II only. D) II and III only. E) None of the above.

B) I and III only.

For companies that provide quarterly reports, how is the fourth quarter reported? A)Every company that reports for the first three quarters must also publish a fourth-quarter report.B)A fourth-quarter report is not required.C)Companies must publish a fourth-quarter report if there are significant changes from the third quarter.D)The SEC requires selected quarterly financial data to be reported separately as a fourth-quarter report.E)When fourth-quarter financial statements are provided, special accounting items of that quarter must also be separately disclosed in the annual financial statements.

B)A fourth-quarter report is not required

How should discontinued operations be reported in an interim report? A)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.E)Include with other operations in interim periods until the annual financial statement is prepared.

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.

Which of the following statements is true according to 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.E)Immaterial items must be disclosed.

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

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 cash and cash equivalents.E)The balance of retained earnings.

C)The change in stockholders' equity.

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. E) Both segments are owned by the same parent company.

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

According to International Financial Reporting Standards (IFRS), all of the following are part of minimum components of interim financial reporting except: A)A condensed statement of cash flows.B) A condensed statement of financial position.C)A condensed statement of accumulated pension liabilities.D)A condensed statement of net income and comprehensive income.E)A condensed statement of changes in equity.

C)A condensed statement of accumulated pension liabilities.

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.E)Seasonal revenues and expenses.

C)Cash flow information.

Which of the following is not a required disclosure in an interim financial report? A)Net income.B)Earnings per share.C)Gross profit.D)Significant changes in estimates or provisions for income taxes.E)Disposal of a component, net of income taxes.

C)Gross profit

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.

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

How should a change from one generally accepted accounting principle to another accepted principle be handled in a third-quarter income statement? A)Retrospectively restate the first-quarter income statement, net of income taxes, as though the change occurred at the beginning of the year.B)Postpone recording of the change to the annual income statement.C)Record the change in the third-quarter income statement, net of income taxes.D)Adjust financial statements for each prior period presented to reflect the effects of the new principle in those reported periods.E)These changes are prohibited by GAAP.

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

Which of the following statements is true? A)In determining reportable segments, two tests are applied and both must be met.B)In determining reportable segments, three tests are applied and all three must be met.C)In determining reportable segments, two tests are applied and only one must be met.D)In determining reportable segments, three tests are applied and only one must be met.E)In determining reportable segments, at least 80% of the revenues from external customers must be reported.

D)In determining reportable segments, three tests are applied and only one must be met.

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? A)France, Germany, All Other Countries.B)United States, Europe, Canada.C)United States, Africa, Europe, Asia.D)United States, Canada, Mexico, Germany.E)North America, Spain, All Other Countries

D)United States, Canada, Mexico, Germany

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

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

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

It helps users make comparisons between a segment of one

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

Recognized in the second quarter.

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

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