Deck 8: Segment and Interim Reporting

Question 1

Priestly Corporation's revenues for the year ended December 31, 2020, were as follows:Consolidated Revenue per the Income Statement: $1,400,000Division 1 Intersegment Sales: $200,000Division 2 Intersegment Sales: $80,000For purposes of the Revenue Test, what amount will be used as the benchmark for determining whether a segment is reportable?

A) $140,000.
B) $148,000.
C) $160,000.
D) $168,000.
E) $0.

Answer 1

D

Question 2

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: According to the profit or loss test, which segments would require disaggregation?

A) A, B, D, and E.
B) A, B, C, and E.
C) A, D, and E.
D) A and D.
E) A only.

Answer 2

C

Question 3

Nigel Corp. had six different operating segments reporting the following operating profit and loss figures: Which one of the following statements is true?

A) Segment A is a reportable segment based on this test.
B) Segment B is a reportable segment based on this test.
C) Segment E is a reportable segment based on this test.
D) Segment C is not a reportable segment based on this test.
E) Segment D is a reportable segment based on this test.

Answer 3

E

Question 4

The Hardware operating segment of Bloom Corporation has the following revenues for the year ended December 31, 2021: For purposes of the revenue test, what amount will be used as total revenues of the Hardware operating segment?

A) $417,000.
B) $440,000.
C) $424,000.
D) $460,000.
E) $480,000.

Question 5

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: According to the revenue test, which segments would require disaggregation?

A) A, B, D, and E.
B) A and B.
C) B and C.
D) A, B, and D.
E) C, D, and E.

Question 6

Thompson Corp. was engaged solely in manufacturing operations. The following data pertain to the operating segments for 2020: What is the minimum amount of assets that each of these segments must own to be considered separately reportable?

A) $9,595,000.
B) $4,670,000.
C) $10,415,200.
D) $5,490,200.
E) $14,265,000.

Question 7

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: When totaling the revenues to use as the basis for the 75% rule, what is the 75% hurdle that must be exceeded by the revenues of the reportable segments?

A) $1,700,000.
B) $12,750,000.
C) $15,900,000.
D) $17,000,000.
E) $21,200,000.

Question 8

The Nigel Co. had four separate operating segments: What amount of revenues must be generated from one customer before that party must be identified as a major customer?

A) $12,760.
B) $65,940.
C) $53,180.
D) $40,420.
E) $17,360.

Question 9

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.

Question 10

The Charlton Co. had three operating segments with the following information: In addition, revenues generated at corporate headquarters are $1,500.What is the minimum amount of revenue that each of these segments must earn to be considered separately reportable?

A) $2,162.
B) $2,615.
C) $2,770.
D) $3,068.
E) $3,223.

Question 11

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.

Question 12

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: For purposes of the profit or loss test, segment C's operating profit or (loss) is

A) $1,300,000.
B) $700,000.
C) $2,000,000.
D) $200,000.
E) $(200,000).

Question 13

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 AssetsRevenues 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.

Question 14

Coulanger Corp. identified four operating segments: A, B, C, and D. Segment A met the revenue test for identifying reportable segments while Segment C met the revenue test, profit or loss test, and asset test. Segment B and Segment D did not meet any of these tests. Which of these segments must be disclosed separately?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 15

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.

A) I, II, and III.
B) I and III only.
C) I and II only.
D) II and III only.
E) None of the above.

Question 16

The Charlton Co. had three operating segments with the following information: In addition, revenues generated at corporate headquarters are $1,500.Combined segment revenues are calculated to be

A) $30,680.
B) $21,620.
C) $26,150.
D) $27,700.
E) $32,230.

Question 17

Thompson Corp. was engaged solely in manufacturing operations. The following data pertain to the operating segments for 2020: What is the minimum amount of profit or loss that each of these segments must earn to be considered separately reportable?

A) $815,000.
B) $820,200.
C) $845,000.
D) $902,220.
E) $959,500.

Question 18

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.

Question 19

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.

Question 20

Thompson Corp. was engaged solely in manufacturing operations. The following data pertain to the operating segments for 2020: What is the minimum amount of revenue that each of these segments must earn to be considered separately reportable?

A) $4,585,000.
B) $3,502,500.
C) $5,490,200.
D) $4,670,000.
E) $9,595,000.

Question 21

Peterson Corporation has three operating segments with the following information: What is the minimum amount of revenue an operating segment must have to be considered a reportable segment?

A) $3,900.
B) $4,000.
C) $4,100.
D) $4,200.
E) $4,400.

Question 22

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): In applying the asset test, what is the minimum amount an operating segment must have in order to meet the asset test for a reportable segment?

A) $12.5.
B) $15.2.
C) $17.2.
D) $18.4.
E) $19.8.

Question 23

Elektronix, Inc. has three operating segments with the following information: What is the operating profit or loss for the VCRs segment?

A) $121,000 profit.
B) $121,000 loss.
C) $124,000 profit.
D) $124,000 loss.
E) $500,000 profit.

Question 24

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.

Question 25

Whitley Corporation identified four operating segments: Automotive, Electrical, Lawn Equipment, and Sporting Goods. Automotive met the revenue test and the profit or loss test. Electrical met all three tests. Lawn Equipment met only the asset test. Sporting Goods did not meet any of the three tests. Which of these segments must be disclosed separately?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 26

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.

Question 27

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): Which operating segments are reportable under the revenue test?

A) Pails and Hardware.
B) Rakes, Pails, and Hardware.
C) Rakes, Hardware, and Accessories.
D) Rakes and Pails.
E) Rakes and Hardware.

Question 28

Elektronix, Inc. has three operating segments with the following information: What is the minimum amount of assets an operating segment must have to be considered a reportable segment?

A) $1,400,000.
B) $2,500,000.
C) $4,100,000.
D) $5,000,000.
E) $25,000,000.

Question 29

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): What is the total amount of revenues in applying the revenue test?

A) $794.
B) $808.
C) $892.
D) $906.
E) $934.

Question 30

Elektronix, Inc. has three operating segments with the following information: What is the minimum amount of revenue an operating segment must have to be considered a reportable segment?

A) $650,000.
B) $660,000.
C) $670,000.
D) $680,000.
E) $690,000.

Question 31

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): Which operating segments are reportable under the asset test?

A) None.
B) Pails.
C) Rakes, Pails, and Shovels.
D) Rakes and Hardware.
E) Rakes, Pails, and Hardware.

Question 32

Schilling, Inc. has three operating segments with the following information: According to the revenue test, which segment(s) are separately reportable?

A) Silver only.
B) Crystal and Silver.
C) China and Crystal.
D) China and Silver.
E) China, Crystal, and Silver.

Question 33

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.

Question 34

Elektronix, Inc. has three operating segments with the following information: What is the minimum amount of operating profit or loss an operating segment must have to be considered a reportable segment?

A) $124,000.
B) $127,600.
C) $100,000.
D) $130,000.
E) $140,000.

Question 35

Elektronix, Inc. has three operating segments with the following information: Which operating segments are separately reportable under the revenue test?

A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.

Question 36

Schilling, Inc. has three operating segments with the following information: What is the minimum amount of revenue an operating segment must have to be considered a reportable segment?

A) $12,000.
B) $15,000.
C) $15,500.
D) $16,200.
E) $16,700.

Question 37

Peterson Corporation has three operating segments with the following information: According to the revenue test, which segment(s) are separately reportable?

A) Mowers only.
B) Mowers and Edgers.
C) Mowers and Weedeaters.
D) Edgers and Weedeaters.
E) Mowers, Edgers, and Weedeaters.

Question 38

Peterson Corporation has three operating segments with the following information: What amount of revenue must be generated from one customer before such party must be identified as a major customer?

A) $3,900.
B) $4,000.
C) $4,100.
D) $4,200.
E) $4,400.

Question 39

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): In applying the profit or loss test, what is the minimum amount an operating segment must have in order to meet the profit or loss test for a reportable segment?

A) $8.2.
B) $9.0
C) $10.4.
D) $13.0.
E) $82.0.

Question 40

Dean Hardware, Inc. is comprised of five operating segments. Information about each of these segments is as follows (in thousands): Which operating segments are reportable under the profit or loss test?

A) Rakes, Pails, and Shovels.
B) Rakes, Pails, Shovels, and Hardware.
C) Rakes, Pails, and Hardware.
D) Rakes, Pails, Shovels, Hardware, and Accessories.
E) Pails and Hardware.

Question 41

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.

Question 42

Elektronix, Inc. has three operating segments with the following information: Which operating segments are separately reportable under the asset test?

A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.

Question 43

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.

Question 44

Elektronix, Inc. has three operating segments with the following information: Which of the segments are separately reportable?

A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.

Question 45

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.

Question 46

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.

Question 47

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.What is the correct journal entry to record cost of goods sold at the end of the first quarter?

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

Question 48

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.

Question 49

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.

Question 50

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.

Question 51

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

A) LIFO liquidations a company expects to be replaced by year-end should be recorded in cost of goods sold, quantified at expected replacement cost rather than original LIFO cost.
B) Lower-of-cost-or-net realizable value adjustments are not made for the interim period if they are expected to reverse by the end of the year.
C) Variances in a standard costing system are reported at the end of the interim period unless they are expected to be absorbed by year-end.
D) FIFO is remeasured using the LIFO method in an interim financial statement.
E) LIFO liquidations not expected to be replaced by the end of the year are reflected in cost of goods sold at original LIFO cost.

Question 52

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.

Question 53

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.

Question 54

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:

A) $83,000
B) $87,000
C) $90,000
D) $221,000
E) $250,000

Question 55

Elektronix, Inc. has three operating segments with the following information: Which operating segments are separately reportable under the operating profit or loss test?

A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.

Question 56

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.

Question 57

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.

Question 58

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.

Question 59

Betsy Kirkland, Inc. incurred a flood loss during the first quarter of 2021 that is deemed both unusual and not expected to recur again in the near future. 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:

A) Ignore the loss.
B) Record the loss in the first quarter as an unusual loss, net of income taxes.
C) Record one-fourth of the loss in the first quarter as an unusual loss, net of income taxes.
D) Ignore the loss in the first quarter, and record it in the annual statement only.
E) Record the loss in the first quarter, but not as an unusual loss, and disclose the loss in a separate note or in the income statement as a separate line item.

Question 60

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.

Question 61

All of the following are required to be reported in interim financial statements with respect to material operating segments, except:

A) Segment assets.
B) Segment revenues from external customers.
C) Intersegment revenues.
D) Segment profit or loss.
E) Reconciliation of segment profit or loss to total income before taxes.

Question 62

How should seasonal revenues be reported in an interim report?

A) Disclose the seasonal nature of business operations, and include a pro forma report for the next 12-month period.
B) Disclose the seasonal nature of business operations but do not include other reports supplemental to the interim report.
C) Disclose the seasonal nature of business operations, and consider a report for the 12-month period ended at the interim date to supplement the interim report.
D) The financial statements should be adjusted to reflect the assumption that no seasonal revenues could be recognized.
E) Seasonal revenues have no particular reporting requirement.

Question 63

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.

Question 64

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.

Question 65

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.

Question 66

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

Question 67

Provo, Inc. has an estimated annual tax rate of 35% in the first quarter of 2021. Pretax income for the first quarter was $300,000. At the end of the second quarter of 2021, Provo expects the annual tax rate to be 32% because of anticipated tax credits. Pretax income for the second quarter was $350,000. Assume no items in either quarter requiring the net-of-tax presentation.How much income tax expense is recognized in the second quarter of 2021?

A) $103,000.
B) $104,000.
C) $112,000.
D) $122,500.
E) $208,000.

Question 68

Baker Corporation changed from the LIFO method to the FIFO method for inventory valuation during 2021. Baker has an effective income tax rate of 35% and 100,000 shares of common stock issued and outstanding. The following additional information is available: Assuming Baker makes the change in the first quarter of 2021, compute net income per common share.

A) $4.92.
B) $4.95.
C) $5.00.
D) $5.05.
E) $5.28.

Question 69

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.

Question 70

Which of the following items of information are required to be included in interim reports for each operating segment?Revenues from external customersSegment profit or lossReconciliation 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.

Question 71

According to authoritative accounting literature, which of the following are required to be disclosed in interim reports?

A) Cash flows from investing activities.
B) Change in cash.
C) Total current liabilities.
D) Total assets.
E) Gross revenues.

Question 72

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.

Question 73

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.

Question 74

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.

Question 75

Baker Corporation changed from the LIFO method to the FIFO method for inventory valuation during 2021. Baker has an effective income tax rate of 35% and 100,000 shares of common stock issued and outstanding. The following additional information is available: Assuming Baker makes the change in the first quarter of 2021, how much is reported as net income for the first quarter of 2021?

A) $492,000.
B) $494,800.
C) $500,000.
D) $505,200.
E) $527,950.

Question 76

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.

Question 77

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

A) Revenues should be recognized on the income tax basis for interim reporting.
B) Revenues should be recognized in interim periods in the same way as they are on an annual basis.
C) Projected losses on long-term contracts should be deferred to the annual report.
D) The percentage-of-completion method of reporting long-term construction projects is not an acceptable method for interim reporting.
E) Revenues should be recognized on the cash basis of accounting for interim reporting.

Question 78

Provo, Inc. has an estimated annual tax rate of 35% in the first quarter of 2021. Pretax income for the first quarter was $300,000. At the end of the second quarter of 2021, Provo expects the annual tax rate to be 32% because of anticipated tax credits. Pretax income for the second quarter was $350,000. Assume no items in either quarter requiring the net-of-tax presentation.How much income tax expense is recognized in the first quarter of 2021?

A) $0.
B) $26,250.
C) $96,000.
D) $105,000.
E) $112,000.

Question 79

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.

Question 80

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.