Question 1

Similar operating segments may be combined if the segments have similar economic characteristics.Which one of the following is a similar economic characteristic under GAAP?
A)The segments' management teams
B)The tax reporting law sections
C)The distribution method for products or services
D)The expected rates of return and risk for the segments' productive assets

Accepted Answer

C

Question 2

Jacana Company uses the LIFO inventory method.During the second quarter,Jacana experienced a 100-unit liquidation in its LIFO inventory at a LIFO cost of $430 per unit.Jacana considered the liquidation temporary and expects to replace the units in the third quarter at an estimated replacement cost of $460 a unit.The cost of goods sold computation in the interim report for the second quarter will
A)include the 100 liquidated units at the $460 estimated replacement unit cost.
B)include the 100 liquidated units at the $430 LIFO unit cost.
C)be understated by $3,000.
D)be overstated by $3,000.

Accepted Answer

A

Question 3

What is the purpose of interim reporting?
A)Provide shareholders with more timely information
B)Provide shareholders with more accurate information
C)Provide shareholders with more extensive detail about specific accounts and transactions
D)Provide shareholders with more current audited information

Accepted Answer

The purpose of interim reporting is to provide shareholders with more timely information, as it provides updates on the company's performance and financial position in the periods between the annual financial statements.

Question 4

Sandpiper Corporation paid $120,000 for annual property taxes on January 15,2014,and $20,000 for building repair costs on March 10,2014.Total repair expenses for the year were estimated to be $200,000,and are normally accrued during the year until incurred.What is the total amount of property tax and repair expense to be reported in Sandpiper's first quarter 2014 interim income statement?
A)$ 50,000
B)$ 80,000
C)$100,000
D)$140,000

Accepted Answer

The property tax for the first quarter is $30,000 ($120,000 annual tax / 4 quarters). The repair expense incurred in the first quarter is $20,000. Therefore, the total expense for the first quarter is $50,000 (property tax) + $20,000 (repair expense) = $70,000. However, the estimated repair expenses are accrued evenly, so $200,000 / 4 = $50,000 for the first quarter. Thus, the total is $30,000 (property tax) + $50,000 (accrued repair expense) = $80,000.

Question 5

How does GAAP view interim accounting periods?
A)As discrete units for which net income may be separately determined
B)As integral units of the entire year for which each interim period is an essential part of an annual period
C)As integral units of the entire year with each interim period as an independent accounting period
D)As discrete units of the entire year using the same principles that are applied to the annual period

Accepted Answer

GAAP views interim accounting periods as integral units of the entire year for which each interim period is an essential part of an annual period. The financial statements prepared for each interim period should be viewed as an extension of the annual financial statements rather than separate and independent financial statements. Therefore, the principles used to prepare the annual financial statements should be applied consistently to each interim period.

Question 6

Which of the following conditions would not indicate that two business segments should be classified as a single operating segment?
A)They have similar amounts of intersegment revenues or expenses.
B)They have a similar distribution method for products.
C)They have similar production processes.
D)They have similar products or services.

Accepted Answer

The key factor for classifying two business segments as a single operating segment is the similarity in economic characteristics, such as products or services, production processes, or distribution methods. Similar amounts of intersegment revenues or expenses do not necessarily indicate similar economic characteristics or operations, making it a less relevant criterion for this classification.

Question 7

Which of the following is not a quantitative threshold for determining a reportable segment?
A)Segment assets are 10% or more of the combined assets of all operating segments.
B)The absolute value of a segment's profit or loss is 10% or more of the greater of (1)the combined reported profit of all operating segments that reported a profit or (2)the absolute value of the combined reported loss of all operating segments that reported a loss.
C)Segment reported revenue,including intersegment revenues,is 10% or more of the combined revenue (both internal and external)of all operating segments.
D)Segment residual profit after the cost of equity is 10% or more of the combined residual profit of all operating segments.

Accepted Answer

While A, B, and C all represent quantitative thresholds for determining reportable segments, D is not a quantitative threshold. Instead, it involves a calculation of residual profit after the cost of equity.

Question 8

In general,GAAP encourages the identification of reportable segments based on the following:
A)Reported segments must account for at least 75% of all external and inter-segment sales.
B)Reported segments must ideally account for at least 75% of all sales,unless there are many smaller divisions and separate reporting would create less clarity in reporting.
C)If there are more than 10 reportable segments,the company should consider additional aggregation of their segments.
D)Reported segments must account for 100% of the external sales,but only 75% of external and inter-segment sales.

Accepted Answer

The answer of In general,GAAP encourages the identification of reportable...

Question 9

Dott Corporation experienced a $100,000 extraordinary loss in the second quarter of 2014 in their East Coast operating segment.The loss should be recognized
A)only at the consolidated report level at the end of the year.
B)entirely in the second quarter of 2014 in the East Coast operating segment.
C)in equal amounts allocated to the remaining three quarters of 2014 at the corporate level.
D)in equal amounts allocated to the remaining three quarters of 2014 of the East Coast segment.

Accepted Answer

According to the matching principle of accounting, expenses should be recognized in the period in which the related revenue is recognized or in the period in which the expense is incurred. As the extraordinary loss was incurred in the second quarter of 2014 in the East Coast operating segment, it should be recognized entirely in that segment in the same quarter. Option A is incorrect as it suggests recognizing the loss only at the consolidated report level, which would disregard the segment reporting requirement. Option C and D are incorrect as they suggest equally allocating the loss over the remaining quarters, which would not reflect the actual timing and amount of the loss.

Question 10

GAAP requires disclosures for each reportable operating segment for each of the following,except for
A)Revenues.
B)Depreciation expense.
C)R&D expenditures.
D)Extraordinary items.

Accepted Answer

The answer of GAAP requires disclosures for each reportable operating...

Question 11

The estimated taxable income for Shebill Corporation on January 1,2014,was $80,000,$100,000,$100,000 and $120,000,respectively,for each of the four quarters of 2014.Shebill's estimated annual effective tax rate was 30%.During the second quarter of 2014,the estimated annual effective tax rate was increased to 34%.Given only this information,Shebill's second quarter income tax expense was
A)$30,000.
B)$34,000.
C)$37,200.
D)$61,200.

Accepted Answer

To calculate the income tax expense for the second quarter, we need to determine the taxable income for the first and second quarters separately.

For the first quarter, the estimated taxable income was $80,000, so the income tax expense would be:

$80,000 x 30% = $24,000

For the second quarter, the estimated taxable income was $100,000, and the effective tax rate was increased to 34%, so the income tax expense would be:

$100,000 x 34% = $34,000

To calculate the total income tax expense for the first half of the year, we add the income tax expenses from the first and second quarters:

$24,000 + $34,000 = $58,000

Since the annual effective tax rate for the last two quarters was 30%, we can assume that the income tax expense for the third and fourth quarters would be the same as in the first quarter, which was $24,000.

Therefore, the total income tax expense for the year would be:

($24,000 x 3) + $34,000 = $106,000

So Shebill's second quarter income tax expense was $34,000.

Question 12

The following table is provided in the disclosures for interim reporting by Bigg Company,regarding the location of their assets.  Based on the table,which of the following statements is true?
A)Only the U.S.and Mexico divisions would be reportable geographic divisions.
B)The U.S.,Mexico and Canada divisions would be reportable geographic divisions.
C)All geographic divisions would be reportable,except for "other."
D)All geographic divisions would be reportable.

Accepted Answer

According to the table provided, the company has assets located in the U.S., Mexico, and Canada, which are all significant enough to meet the reporting threshold. Therefore, the U.S., Mexico, and Canada divisions would be reportable geographic divisions. The "other" category might not be significant enough to meet the reporting threshold, but it is not specified in the table.

Question 13

Which one of the following operating segment disclosures is not required by GAAP?
A)Total Assets
B)Equity
C)Intersegment sales
D)Extraordinary items

Accepted Answer

Equity is not a required disclosure for operating segments under GAAP. GAAP focuses on segment reporting on revenues, profit or loss, certain specific expenses, and assets. Equity disclosures are generally at the consolidated entity level, not at the segment level.

Question 14

Which one of the following operating segment information items is not directly named by GAAP to be reconciled to consolidated totals?
A)Assets
B)Liabilities
C)Revenues
D)Profit or loss

Accepted Answer

GAAP requires the reconciliation of segment revenues, profit or loss, and assets to consolidated totals, but it does not specifically require the reconciliation of segment liabilities to consolidated totals.

Question 15

What is the threshold for reporting a major customer?
A)5 percent of revenues
B)5 percent of profits
C)10 percent of revenues
D)10 percent of profits

Accepted Answer

The threshold for reporting a major customer is normally set at 10 percent of revenues. Reporting major customers is crucial for maintaining transparency and monitoring potential risk factors. It is important to report not just the customer's contribution to revenue but also any potential risks related to the customer's financial stability or changing market conditions. This helps the company to assess the potential impact on their financial performance and take appropriate steps to mitigate those risks.

Question 16

GAAP requires that segment information be reported
A)by geographics,without regard to size of the segment.
B)by geographics,without regard to industry or product-line.
C)however management organizes the enterprise into units for internal decision-making and performance-evaluation purposes.
D)by industry or product-line,without regard to geographics.

Accepted Answer

GAAP requires that segment information be reported based on how management has organized the enterprise into units for internal decision-making and performance evaluation purposes. This approach recognizes that different types of business units or segments may require different performance metrics and measures. Reporting by geographics or industry/product-line alone may not provide sufficient insight into the performance of the enterprise as a whole.

Question 17

An enterprise has eight reporting segments.Five segments show an operating profit and three segments show an operating loss.In determining which segments are classified as reporting segments under the operating profits test,which of the following statements is correct?
A)The test value for all segments is 10% of consolidated net profit.
B)The test value for profitable segments is 10% or more of those segments reporting a profit,and the test value for loss segments is 10% or more of those segments reporting a loss.
C)The test value for loss segments is 10% of the greater of (a)the absolute value of the sum of those segments reporting losses,or (b)10% of consolidated net profit.
D)The test value for all segments is 10% of the greater of (a)the absolute value of the sum of those segments reporting profits,or (b)the absolute value of the sum of those segments reporting losses.

Accepted Answer

The correct answer is D because it accurately reflects the approach to determining significant segments by considering both the absolute value of profits and losses across all segments, ensuring a comprehensive evaluation of segment significance relative to the overall financial performance of the enterprise.

Question 18

Cole Company has the following 2014 financial data:  Cole Company should add segments if
A)the sum of its segments' external revenue does not exceed $600,000.
B)the sum of its segments' external revenue does not exceed $825,000.
C)the sum of its segments' revenue including intersegment revenue does not exceed $600,000.
D)the sum of its segments' revenue including intersegment revenue does not exceed $825,000.

Accepted Answer

The answer of Cole Company has the following 2014 financial...

Question 19

On January 5,2014,Eagle Corporation paid $50,000 in real estate taxes for the calendar year.In March of 2014,Eagle paid $180,000 for an annual machinery overhaul and $10,000 for the annual CPA audit fee.What amount was expensed for these items on Eagle's quarterly interim financial statements?
A) 
B) 
C) 
D)

Accepted Answer

The answer of On January 5,2014,Eagle Corporation paid $50,000 in...

Question 20

For an operating segment to be considered a reporting segment under the revenue threshold,its reported revenue must be 10% or more of
A)the combined enterprise revenues,eliminating all relevant intracompany transfers and balances.
B)the combined revenues,excluding intersegment revenues,of all operating segments.
C)the combined revenues,including intersegment revenues,of all operating segments.
D)the consolidated revenue of all operating segments.

Accepted Answer

According to ASC 280-10-50-4, a segment is considered a reportable segment if its reported revenue is 10% or more of the combined revenues, including intersegment revenues, of all operating segments. Therefore, choice C is the correct answer.

Quiz 15: Segment and Interim Financial Reporting

Similar operating segments may be combined if the segments have similar economic characteristics.Which one of the following is a similar economic characteristic under GAAP?

What is the purpose of interim reporting?

How does GAAP view interim accounting periods?

Which of the following conditions would not indicate that two business segments should be classified as a single operating segment?

Which of the following is not a quantitative threshold for determining a reportable segment?

In general,GAAP encourages the identification of reportable segments based on the following:

Dott Corporation experienced a $100,000 extraordinary loss in the second quarter of 2014 in their East Coast operating segment.The loss should be recognized

GAAP requires disclosures for each reportable operating segment for each of the following,except for

The following table is provided in the disclosures for interim reporting by Bigg Company,regarding the location of their assets. Based on the table,which of the following statements is true?

Which one of the following operating segment disclosures is not required by GAAP?

Which one of the following operating segment information items is not directly named by GAAP to be reconciled to consolidated totals?

What is the threshold for reporting a major customer?

GAAP requires that segment information be reported

An enterprise has eight reporting segments.Five segments show an operating profit and three segments show an operating loss.In determining which segments are classified as reporting segments under the operating profits test,which of the following statements is correct?

Cole Company has the following 2014 financial data: Cole Company should add segments if

On January 5,2014,Eagle Corporation paid $50,000 in real estate taxes for the calendar year.In March of 2014,Eagle paid $180,000 for an annual machinery overhaul and $10,000 for the annual CPA audit fee.What amount was expensed for these items on Eagle's quarterly interim financial statements?

For an operating segment to be considered a reporting segment under the revenue threshold,its reported revenue must be 10% or more of