Question 1

Samuel Corporation foresees a downturn in its business in the medium term.It expects to sustain an operating loss of $160,000 for the full year ending December 31,2008.Samuel's tax rate is 35 percent.Anticipated tax credits for 2008 total $8,000.No permanent differences are expected.Realization of the full tax benefit of the expected operating loss and realization of anticipated tax credits are assured beyond any reasonable doubt because they will be carried back.For the first quarter ended March 31,2008,Samuel reported an operating loss of $30,000.How much of a tax benefit should Samuel report for the interim period ended March 31,2008?
A)$8,000
B)$12,000
C)$13,500
D)$15,500

Accepted Answer

B

Question 2

Assume that the replacement did not happen in November.In December,the company decided not to replace any of the 1,500 units.The entry required on December 31 to eliminate valuation accounts related to the inventory that will not be replaced will include:
A)a debit to Excess of Replacement Cost over LIFO Cost of Inventory Liquidation for $22,500.
B)a credit to Cost of Goods Sold for $15,000.
C)a debit to Inventory for $70,000.
D)a debit to Inventory for $15,000.

Accepted Answer

If the company decides not to replace any units, then they will need to eliminate any valuation accounts related to the inventory that will not be replaced. This means that they will need to credit their Excess of Replacement Cost over LIFO Cost of Inventory Liquidation account for $22,500 (the amount that was originally debited when the replacement was planned). Since the company will not be replacing any units, they will need to recognize the loss by debiting their Cost of Goods Sold account for $15,000 (the difference between the original cost and market value of the 1,500 units). There is no need to credit/debit their Inventory account since they are not making any changes to their physical inventory.

Question 3

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit
-Based on the preceding information,in the entry in August to record the sale of the 2,000 units:
A)Cost of Goods Sold will be debited for $70,000.
B)Inventory will be credited for $85,000.
C)Excess of Replacement Cost over LIFO Cost of Inventory Liquidation will be credited for $15,000.
D)Excess of Replacement Cost over LIFO Cost of Inventory Liquidation will be credited for $67,000.

Accepted Answer

C

Question 4

Trevor Company discloses supplementary operating segment information for its three reportable segments.Data for 2008 are available as follows: Additional 2008 expenses include indirect operating expenses of $200,000.Appropriately selected common indirect operating expenses are allocated to segments based on the ratio of each segment's sales to total sales.The 2008 operating profit for Segment B was:
A)$180,000
B)$120,000
C)$150,000
D)$250,000

Accepted Answer

The answer of Trevor Company discloses supplementary operating segment information...

Question 5

Forge Company,a calendar-year entity,had 6,000 units in its beginning inventory for 2008.On December 31,2007,the units had been adjusted down to $470 per unit from an actual cost of $510 per unit.It was the lower of cost or market.No additional units were purchased during 2008.The following additional information is provided for 2008:
Forge does not have sufficient experience with the seasonal market for its inventory units and assumes that any reductions in market value during the year will be permanent.
 
-Based on the preceding information,the cost of goods sold for the year 2008,is:
A)$2,080,000
B)$1,880,000
C)$1,835,000
D)$1,910,000

Accepted Answer

The answer of Forge Company,a calendar-year entity,had 6,000 units in...

Question 6

Trimester Corporation's revenue for the year ended December 31,2008,was as follows: Trimester has a reportable operating segment if that segment's revenue exceeds:
A)$65,500
B)$60,000
C)$64,500
D)$61,000

Accepted Answer

Trimester has a reportable operating segment if that segment's revenue exceeds $60,000.

Question 7

On March 15,2009,Clarion Company paid property taxes of $60,000 on its factory building for calendar year 2009.On July 1,2009,Clarion made $40,000 in unanticipated repairs to its machinery.The repairs will benefit operations for the remainder of the calendar year.What total amount of these expenses should be included in Clarion's quarterly income statement for the three months ended September 30,2009?
A)$55,000
B)$15,000
C)$35,000
D)$40,000

Accepted Answer

The quarterly income statement for the three months ended September 30, 2009, should include property taxes of $15,000 ($60,000/4) and repairs of $20,000 ($40,000/2) for a total of $35,000 (option C). The full amount of the property taxes should be included, but only half of the repairs as they only benefit operations for half of the calendar year. Therefore, options A and D are both incorrect. Option B is also incorrect as it does not take into account the property taxes paid.

Question 8

Five of eight internally reported operating segments of Rollins Company qualify under the standards set by FASB 131 for segment reporting.However,the five identified segments do not meet the 75 percent revenue test.FASB 131 prescribes that management:
A)subdivide segments until there are at least 10 reportable segments.
B)consolidate the remaining operating segments and include them under an "all other" category.
C)select additional operating segments until the 75% threshold is met.
D)include the heading "corporate headquarters" as an operating segment.

Accepted Answer

Management should select additional operating segments until the 75% threshold of total external revenue is met, as per FASB 131 requirements.

Question 9

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit
-Based on the preceding information,in the entry to record the replacement of the 1,500 units in November,Inventory will be debited for:
A)$52,500.
B)$75,000.
C)$67,500.
D)$60,000.

Accepted Answer

The answer of Wakefield Company uses a perpetual inventory system....

Question 10

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit
-Based on the preceding information,in the entry to record the replacement of the 1,500 units in November,Accounts Payable will be credited for:
A)$67,500.
B)$75,000.
C)$62,500.
D)$60,000.

Accepted Answer

The cost of replacing 1,500 units at $50 per unit is $75,000 (1,500 x $50), and this is the amount that should be credited to Accounts Payable.

Question 11

Derby Company pays its executives a bonus of 6 percent of income before deducting the bonus and income taxes.For the quarter ended March 31,2008,Derby had income before the bonus and income tax of $12,000,000.For the year ended December 31,2008,Derby estimates that its income before bonus and income taxes will be $70,000,000.For the quarter ended March 31,2008,what is the amount of the bonus that Derby should deduct on its income statement?
A)$4,200,000
B)$720,000
C)$1,050,000
D)$180,000

Accepted Answer

To calculate the bonus for the quarter ended March 31, 2008, we need to multiply the income before deducting the bonus and income taxes by the bonus rate of 6%:

$12,000,000 x 0.06 = $720,000

Therefore, the amount of the bonus that Derby should deduct on its income statement for the quarter ended March 31, 2008, is $720,000.

Question 12

Trevor Company discloses supplementary operating segment information for its three reportable segments.Data for 2008 are available as follows: Allocable costs for the year was $180,000.Allocable costs are assigned based on the ratio of a segment's income before allocable costs to total income before allocable costs.The 2008 operating profit for Segment B was:
A)$110,000
B)$180,000
C)$126,000
D)$120,000

Accepted Answer

To calculate the allocable costs, we need to first calculate each segment's income before allocable costs. Let M, N, and B be the incomes of Segment M, Segment N, and Segment B respectively.

We know that: 
M + N + B = Total Income before Allocable Costs
And, 
Allocable Costs = ($180,000)

We do not have any information about the incomes of Segment M and Segment N, but we can use the given information to set up two equations involving three unknowns:

B / (M + N + B) = 30%
(M + N) / (M + N + B) = 70%

Simplifying these equations, we get:

B = 0.3(M + N + B)
M + N = 0.7(M + N + B)

Solving for M + N, we get:

M + N = (0.7/0.3)B = 2.33B

We can use this equation to express the allocable costs as a ratio of Segment B's income:

Allocable Costs / (M + N + B) = Allocable Costs / (2.33B + B) = Allocable Costs / 3.33B = 30%

Simplifying this equation, we get:

Allocable Costs = 0.3(3.33B)B = 0.999B

Substituting the value of Allocable Costs, we get:

0.999B = $180,000
B = $180,180

Therefore, the operating profit for Segment B was:

Operating Profit = B - Allocable Costs
Operating Profit = $180,180 - $120,000
Operating Profit = $60,180

However, since the question only asks for the income of Segment B and not the operating profit, we need to add back the allocable costs to get the income:

Income for Segment B = Operating Profit + Allocable Costs
Income for Segment B = $60,180 + $120,000
Income for Segment B = $180,180

Therefore, the correct answer is D) $120,000.

Question 13

Collins Company reported consolidated revenue of $120,000,000 in 2008.Collins operates in two geographic areas,domestic and Asia.The following information pertains to these two areas: What calculation below is correct to determine if the revenue test is satisfied for the Asian operations?
A)$58,000,000/$140,000,000
B)$50,000,000/$120,000,000
C)$58,000,000/$120,000,000
D)$50,000,000/$140,000,000

Accepted Answer

The revenue test is satisfied if the revenue from the Asian operations is at least 10% of the total consolidated revenue. The correct calculation is $50,000,000 (Asian revenue) divided by $120,000,000 (total consolidated revenue).

Question 14

In 2006 and 2007,each of Putney Company's four operating segments met one of the three quantitative tests for segment reporting.In 2008,Segment B failed to qualify under the prescribed tests because of abnormal financial conditions.The other three segments qualified for reporting.For 2008,Segment B:
A)should be excluded from segment disclosure but referred to in the management letter to shareholders.
B)should be distinctly separated from the other three segments and listed as a "nonqualifying" segment.
C)should be combined with one of the other three segments and reported.
D)should be included in the segment disclosures at the discretion of management.

Accepted Answer

Segment B can be included in the segment disclosures at the discretion of management, as it had previously qualified and may still provide useful information to users of the financial statements.

Question 15

Forge Company,a calendar-year entity,had 6,000 units in its beginning inventory for 2008.On December 31,2007,the units had been adjusted down to $470 per unit from an actual cost of $510 per unit.It was the lower of cost or market.No additional units were purchased during 2008.The following additional information is provided for 2008:
Forge does not have sufficient experience with the seasonal market for its inventory units and assumes that any reductions in market value during the year will be permanent.
 
-Based on the preceding information,the cost of goods sold for the first quarter is:
A)$636,000
B)$564,000
C)$546,000
D)$624,000

Accepted Answer

Since no additional units were purchased during the year, the beginning inventory of 6,000 units would be the same as the ending inventory of 2007. Therefore, the cost per unit would still be $470. Since Forge assumes any reductions in market value during the year will be permanent, the cost of goods sold would be calculated using the lower of cost or market price of $470. The cost of goods sold for the first quarter would be 4,000 units (assuming an equal amount of units were sold in each quarter) times $470 per unit, which equals $1,880,000. Divide this by 3 to get the cost of goods sold for the first quarter, which is $636,000.

Question 16

Forge Company,a calendar-year entity,had 6,000 units in its beginning inventory for 2008.On December 31,2007,the units had been adjusted down to $470 per unit from an actual cost of $510 per unit.It was the lower of cost or market.No additional units were purchased during 2008.The following additional information is provided for 2008:
Forge does not have sufficient experience with the seasonal market for its inventory units and assumes that any reductions in market value during the year will be permanent.
 
-Based on the preceding information,the cost of goods sold for the second quarter is:
A)$416,000
B)$364,000
C)$304,000
D)$424,000

Accepted Answer

The answer of Forge Company,a calendar-year entity,had 6,000 units in...

Question 17

On June 30,2008,String Corporation incurred a $220,000 net loss from disposal of a business component.Also,on June 30,2008,String paid $60,000 for property taxes assessed for the calendar year 2008.What amount of the preceding items should be included in the determination of String's net income or loss for the six-month interim period ended June 30,2008?
A)$250,000
B)$220,000
C)$140,000
D)$280,000

Accepted Answer

The answer of On June 30,2008,String Corporation incurred a $220,000...

Question 18

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit
-Based on the preceding information,in the entry to record the replacement of the 1,500 units in November,Cost of Goods Sold will be debited for:
A)$52,500.
B)$22,500.
C)$15,000.
D)$7,500.

Accepted Answer

The answer of Wakefield Company uses a perpetual inventory system....

Question 19

During the third quarter of 2008,Pride Company sold a piece of equipment at an $8,000 gain.What portion of the gain should Pride report in its income statement for the third
Quarter of 2008?
A)$0
B)$2,000
C)$4,000
D)$8,000

Accepted Answer

The entire gain of $8,000 should be reported in the income statement for the third quarter of 2008, as it was realized during that period.

Question 20

William Corporation,which has a fiscal year ending January 31,had the following pretax accounting income and estimated effective annual income tax rates for the first three quarters of the year ended January 31,2008: William's income tax expenses in its interim income statement for the third quarter are:
A)$36,000.
B)$73,500.
C)$46,500.
D)$120,000.

Accepted Answer

To calculate the income tax expense for the third quarter, we need to determine the cumulative tax expense up to the third quarter and then subtract the tax expense already recognized in the first two quarters. The effective tax rate is applied to the cumulative pretax income up to the third quarter, and the difference from the previous quarters' tax expense gives the third quarter's tax expense.

Quiz 13: Segment and Interim Reporting

Assume that the replacement did not happen in November.In December,the company decided not to replace any of the 1,500 units.The entry required on December 31 to eliminate valuation accounts related to the inventory that will not be replaced will include:

Trimester Corporation's revenue for the year ended December 31,2008,was as follows: Trimester has a reportable operating segment if that segment's revenue exceeds:

Five of eight internally reported operating segments of Rollins Company qualify under the standards set by FASB 131 for segment reporting.However,the five identified segments do not meet the 75 percent revenue test.FASB 131 prescribes that management:

Collins Company reported consolidated revenue of $120,000,000 in 2008.Collins operates in two geographic areas,domestic and Asia.The following information pertains to these two areas: What calculation below is correct to determine if the revenue test is satisfied for the Asian operations?

During the third quarter of 2008,Pride Company sold a piece of equipment at an $8,000 gain.What portion of the gain should Pride report in its income statement for the third Quarter of 2008?