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1. ACC 401 Week 10 Quiz – Strayer
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Quiz 9 Chapter 14
Reporting for Segments and for Interim Financial Periods
1. A component of an enterprise that may earn revenues and incur expenses, and
about which management evaluates separate financial information in deciding
how to allocate resources and assess performance is a(n)
a. identifiable segment.
b. operating segment.
c. reportable segment.
d. industry segment.
2. An entity is permitted to aggregate operating segments if the segments are
similar regarding the
a. nature of the production processes.
b. types or class of customers.
c. methods used to distribute products or provide services.
d. all of these.
3. Which of the following is not a segment asset of an operating segment?
a. Assets used jointly by more than one segment.
b. Assets directly associated with a segment.
c. Assets maintained for general corporate purposes.
d. Assets used exclusively by a segment.
4. SFAS No. 131 requires the disclosure of information on an enterprise's
operations in different industries for
1. each annual period presented.
2. each interim period presented.
3. the current period only.
a. 1
b. 2
c. 3
d. both 1 and 2
5. Which of the following is not required to be disclosed by SFAS No. 131?
a. Information concerning the enterprise's products.
b. Information related to an enterprise's foreign operations.
c. Information related to an enterprise's major suppliers.
d. All of the above are required disclosures.

2. 6. To determine whether a substantial portion of a firm's operations are explained
by its segment information, the combined revenue from sales to unaffiliated
customers of all reportable segments must constitute at least
a. 10% of the combined revenue of all operating segments.
b. 75% of the combined revenue of all operating segments.
c. 10% of the combined revenue from sales to unaffiliated customers of all
operating segments.
d. 75% of the combined revenue from sales to unaffiliated customers of all
operating segments.
7. A segment is considered to be significant if its
1. reported profit is at least 10% of the combined profit of all operating
segments.
2. reported profit (loss) is at least 10% of the combined reported profit of
all operating segments not reporting a loss.
3. reported profit (loss) is at least 10% of the combined reported loss of
all operating segments that reported a loss.
a. 1
b. 2
c. 3
d. both 2 and 3
8. Which of the following disclosures is not required to be presented for a firm's
reportable segments?
a. Information about segment assets
b. Information about the bases for measurement
c. Reconciliation of segment amounts and consolidated amounts for revenue,
profit or loss, assets, and other significant items.
d. All of these must be presented.
9. Current authoritative pronouncements require the disclosure of segment
information when certain criteria are met. Which of the following reflects the
type of firm and type of financial statement for which this disclosure is
required?
a. Annual financial statements for publicly held companies.
b. Annual financial statements for both publicly held and nonpublicly held
companies.
c. Annual and interim financial statements for publicly held companies.
d. Annual and interim financial statements for both publicly held and
nonpublicly held companies.
10. An enterprise determines that it must report segment data in annual reports for
the year ended December 31, 2011. Which of the following would not be an
acceptable way of reporting segment information?
a. Within the body of the financial statements, with appropriate explanatory
disclosures in the footnotes
b. Entirely in the footnotes to the financial statements.
c. As a special report issued separately from the financial statements.

3. d. In a separate schedule that is included as an integral part of the financial
statements.
11. Selected data for a segment of a business enterprise are to be separately
reported in accordance with SFAS No. 131 when the revenues of the segment
is 10% or more of the combined
a. net income of all segments reporting profits.
b. external and internal revenue of all reportable segments.
c. external revenue of all reportable segments.
d. revenues of all segments reporting profits.
12. Long Corporation's revenues for the year ended December 31, 2011, were as
follows
Consolidated revenue per income statement $800,000
Intersegment sales 105,000
Intersegment transfers 35,000
Combined revenues of all operating segments $940,000
Long has a reportable segment if that segment's revenues exceed
a. $80,000.
b. $90,500.
c. $94,000.
d. $14,000.
13. Revenue test
(dollars in thousands)
Wholesale Retail Finance
Segment Segment Segment
Sales to unaffiliated customers $3,600 $1,500 $-0-
Sales – intersegment 400 240 -0-
Loan interest income – intersegment -0- 120 900
Loan interest income – unaffiliated -0- 240 80
Income from equity method investees -0- 280 -0-
Determine the amount of revenue for each of the three segments that would be
used to identify the reportable industry segments in accordance with the
revenues test specified by SFAS 131.
Wholesale Retail Finance
a. $3,600 $1,500 $ -0-
b. 4,000 1,740 -0-
c. 4,000 1,980 980
d. 4,000 2,380 980
14. Which of the following is not part of the information about foreign operations
that is required to be disclosed?
a. Revenues from external customers
b. Operating profit or loss, net income, or some other common measure of
profitability
c. Capital expenditures

4. d. Long-lived assets

5. 15. Eaton, Inc., discloses supplemental industry segment information. The
following data are available for 2011.
Traceable
Segment Sales operating expenses
A $420,000 $255,000
B 480,000 300,000
C 300,000 165,000
$1,200,000 $720,000
Additional 2011 expenses, not included above, are as follows:
Indirect operating expenses $240,000
General corporate expenses 180,000
Appropriate common expenses are allocated to segments based on the ratio of
a segment's sales to total sales. What should be the operating profit for
Segment C for 2011?
a. $135,000
b. $ 75,000
c. $ 105,000
d. $ 30,000
16. Gant Company has four manufacturing divisions, each of which has been
determined to be a reportable segment. Common operating costs are
appropriately allocated on the basis of each division's sales in relation to
Gant’s aggregate sales. Gant’s Delta division accounted for 40% of Gant's
total sales in 2011. For the year ended December 31, 2011, Delta had sales of
$5,000,000 and traceable costs of $3,600,000. In 2011, Gant incurred
operating costs of $350,000 that were not directly traceable to any of the
divisions. In addition, Gant incurred interest expense of $360,000 in 2011. In
reporting supplementary segment information, how much should be shown as
Delta's operating profit for 2011?
a. $1,400,000
b. $1,256,000
c. $1,260,000
d. $1,116,000
17. For external reporting purposes, it is appropriate to use estimated gross profit
rates to determine the ending inventory value for
Interim Annual
Reporting Reporting
a. No No
b. No Yes
c. Yes No
d. Yes Yes
18. Inventory losses from market declines that are expected to be temporary
a. should be recognized in the interim period in which the decline occurs.

6. b. should be recognized in the last (fourth) quarter of the year in which the
decline occurs.
c. should not be recognized.
d. none of these.
19. Gains and losses that arise in an interim period should be
a. recognized in the interim period in which they arise.
b. recognized in the last quarter of the year in which they arise.
c. allocated equally among the remaining interim periods.
d. deferred and included only in the annual income statement.
20. If a cumulative effect type accounting change is made during the first interim
period of a year
a. no cumulative effect of the change should be included in net income of the
period of change.
b. the cumulative effect of the change on retained earnings at the beginning
of the year should be included in net income of the first interim period.
c. the cumulative effect of the change should be allocated to the current and
remaining interim periods of the year.
d. none of these.
21. Which of the following does not have to be disclosed in interim reports?
a. Seasonal costs or expenses.
b. Significant changes in estimates.
c. Disposal of a segment of a business.
d. All of these must be disclosed.
22. For interim financial reporting, the effective tax rate should reflect
Anticipated Extraordinary
Tax Credits Items
a. Yes Yes
b. Yes No
c. No Yes
d. No No
23. Companies using the LIFO method may encounter a liquidation of base period
inventories at an interim date that is expected to be replaced by the end of the
year. In these cases, cost of goods sold should be charged with the
a. cost of the most recent purchases.
b. average cost of the liquidated LIFO base.
c. expected replacement cost of the liquidated LIFO base.
d. none of these.
24. In considering interim financial reporting, how did the Accounting Principles
Board conclude that each reporting should be viewed?
a. As a "special" type of reporting that need not follow generally accepted
accounting principles.
b. As useful only if activity is evenly spread throughout the year so that
estimates are unnecessary.

7. c. As reporting for a basic accounting period.
d. As reporting for an integral part of an annual period.
25. When a company issues interim financial statements, extraordinary items
should be
a. allocated to the current and remaining interim periods of the current year
on a pro rata basis.
b. deferred and included only in the annual income statement.
c. included in the determination of net income in the interim period in which
they occur.
d. charged or credited directly to retained earnings so that comparisons of
interim results of operations will not be distorted.
26. If annual major repairs made in the first quarter and paid for in the second
quarter clearly benefit the entire year, when should they be expensed?
a. An allocated portion in each of the last three quarters
b. An allocated portion in each quarter of the year
c. In full in the first quarter
d. In full in the second quarter
27. During the second quarter of 2011, Dodge Company sold a piece of equipment
at a gain of $90,000. What portion of the gain should Dodge report in its
income statement for the second quarter of 2011?
a. $90,000
b. $45,000
c. $30,000
d. $ -0-
28. In January 2011, Abel Company paid $200,000 in property taxes on its plant
for the calendar year 2011. Also in January 2011, Abel estimated that its year-
end bonuses to executives for 2011 would be $800,000. What is the amount of
expenses related to these two items that should be reflected in Abel's quarterly
income statement for the three months ended June 30, 2011 (second quarter)?
a. $ -0-
b. $250,000
c. $ 50,000
d. $200,000
29. For interim financial reporting, a company's income tax provision for the
second quarter of 2011 should be determined using the
a. statutory tax rate for 2011.
b. effective tax rate expected to be applicable for the full year of 2011 as
estimated at the end of the first quarter of 2011.
c. effective tax rate expected to be applicable for the full year of 2011 as
estimated at the end of the second quarter of 2011.
d. effective tax rate expected to be applicable for the second quarter of 2011.
30. Which of the following reporting practices is permissible for interim financial
reporting?
a. Use of the gross profit method for interim inventory pricing.

8. b. Use of the direct costing method for determining manufacturing
inventories.
c. Deferral of unplanned variances under a standard cost system until year-
end.
d. Deferral of inventory market declines until year-end.
31. Which of the following statements most accurately describes interim period
tax expense?
a. The best estimate of the annual tax rate times the ordinary income (loss)
for the quarter.
b. The best estimate of the annual tax rate times income (loss) for the year to
date less tax expense (benefit) recognized in previous interim periods.
c. Average tax rate for each quarter, including the current quarter, times the
current income (loss).
d. The previous year's actual effective tax rate times the current quarter's
income.
32. The computation of a company's third quarter provision for income taxes
should be based upon earnings
a. for the quarter at an expected annual effective income tax rate.
b. for the quarter at the statutory rate.
c. to date at an expected annual effective income tax rate less prior quarters'
provisions.
d. to date at the statutory rate less prior quarters' provisions.
33. Finney, a calendar year company, has the following income before income tax
provision and estimated effective annual income tax rates for the first three
quarters of 2011:
Income Before Estimated Effective
Income Tax Annual Tax Rate
Quarter Provision at the End of Quarter
First $120,000 25%
Second 160,000 25%
Third 200,000 30%
Finney's income tax provision in its interim income statement for the third
quarter should be
a. $74,000.
b. $60,000.
c. $50,000.
d. $144,000.
34. An inventory loss from a market price decline occurred in the first quarter.
The loss was not expected to be restored in the fiscal year. However, in the
third quarter the inventory had a market price recovery that exceeded the
market decline that occurred in the first quarter. For interim reporting, the
dollar amount of net inventory should
a. decrease in the first quarter by the amount of the market price decline and
increase in the third quarter by the amount of the market price recovery.

9. b. decrease in the first quarter by the amount of the market price decline and
increase in the third quarter by the amount of the decrease in the first
quarter.
c. not be affected in the first quarter and increase in the third quarter by the
amount of the market price recovery that exceeded the amount of the
market price decline.
d. not be affected in either the first quarter or the third quarter.
35. Advertising costs may be accrued or deferred to provide an appropriate
expense in each period for
Interim Annual
Reporting Reporting
a. Yes No
b. Yes Yes
c. No No
d. No Yes
Problems
14-1 The following information is available for Torrey Company for 2011:
a. In early April Torrey made major repairs to its equipment at a cost of
$90,000. These repairs will benefit the remainder of 2011 operations.
b. At the end of May, Torrey sold machinery with a book value of $35,000
for $45,000.
c. An inventory loss of $60,000 from market decline occurred in July. In the
fourth quarter the inventory had a market value recovery that exceeded the
market decline by $30,000.
Required:
Compute the amount of expense/loss that would appear in Torrey Company's
June 30, September 30, and December 31, 2011, quarterly financial
statements.
14-2 Stein Corporation's operations involve three industry segments, X, Y, and Z.
During 2011, the operating profit (loss) of each segment was:
Operating
Segment Profit (Loss)
X $ 600
Y 8,100
Z (6,300)
Required:
Determine which of the segments are reportable segments.
14-3 Bass Industries operates in four different industries. Information concerning
the operations of these industries for the year 2011 is:

10. Revenue
Industry Operating Segment
Segment Total Intersegment Profit (Loss) Assets
A $ 24,000 $4,200 $ 2,700 $ 22,400
B 18,000 2,200 (2,000) 25,200
C 90,000 14,000 3,600 70,000
D 168,000 -0- 23,700 162,400
$300,000 $28,000 $280,000
Required:
Complete the following schedule to determine which of the above segments
must be treated as reportable segments.
10% Test For
Segment Revenue Op. Profit (Loss) Segment Assets
Reportable?
A
B
C
D
14-4 Logan Company prepares quarterly financial statements. The following
information is available concerning calendar year 2011:
Estimated full-year earnings $3,000,000
Full-year permanent differences:
Penalty for pollution 150,000
Estimated dividend income exclusion 60,000
Actual pretax earnings, 1/1/11 to 3/31/11 480,000
Nominal income tax rate 40%
Required:
Compute the income tax provision for the first quarter of 2011.
14-5 XYZ Corporation has eight industry segments with sales, operating profit and
loss, and identifiable assets at and for the year ended December 31, 2011, as
follows:
Sales to
Unaffiliated
Customers
Sales to
Affiliated
Customers
Profit or
(Loss)
Segment
Assets
Steel $1,350,000 $150,000 $265,000 $2,250,000
Auto Parts 1,200,000 --- 450,000 1,430,000
Coal Mine 600,000 450,000 (300,000) 1,200,000
Textiles 530,000 220,000 150,000 750,000
Paint 1,120,000 380,000 300,000 1,050,000
Lumber 710,000 --- (75,000) 600,000

11. Leisure Time 690,000 --- 110,000 450,000
Electronics 600,000 --- 300,000 670,000
Total $6,800,000 $1,200,000 $1,200,000 $8,400,000
Required:
A. Identify the segments, which are reportable segments under one or
more of the 10 percent revenue, operating profit, or assets tests.
B. After reportable segments are determined under the 10 percent tests,
they must be reevaluated under a 75 percent revenue test before a final
determination of reportable segments can be made. Under this 75
percent test, identify if any other segments may have to be reported.

12. 14-6 Ace Company, which uses the FIFO inventory method, had 508,000 units in
inventory at the beginning of the year at a FIFO cost per unit of $20. No
purchases were made during the year. Quarterly sales information and end-of-
quarter replacement cost figures follow:
End-of- Quarter
Quarter Unit Sales Replacement Cost
1 200,000 $17
2 60,000 18
3 85,000 13
4 61,000 18
The market decline in the first quarter was expected to be nontemporary.
Declines in other quarters were expected to be permanent.
Required:
Determine cost of goods sold for the four quarters and verify the amounts by
computing cost of goods sold using the lower-of-cost-or-market method
applied on an annual basis.
14-7 Barr Company’s actual earnings for the first two quarters of 2011 and its
estimate during each quarter of its annual earnings are:
Actual first-quarter earnings $ 800,000
Actual second-quarter earnings 1,020,000
First-quarter estimate of annual earnings 2,700,000
Second-quarter estimate of annual earnings 2,830,000
Barr Company estimated its permanent differences between accounting
income and taxable income for 2011 as:
Environmental violation penalties $ 45,000
Dividend income exclusion 320,000
These estimates did not change during the second quarter. The combined state
and federal tax rate for Barr Company for 2011 is 40%.
Required:
Prepare journal entries to record Barr Company’s provisions for income taxes
for each of the first two quarters of 2011.

13. Short Answer
1. In SFAS No. 131, the FASB requires all public companies to report a variety
of information for reportable segments. Define a reportable segment and
identify the information to be reported for each reportable segment.
2. Publicly owned companies are usually required to file some type of quarterly
(interim) report as part of the agreement with the stock exchanges that list
their stock. Indicate two problems with interim reporting and GAAP’s position
on this reporting.
Short Answer Questions from the Textbook
1. For what types of companies would segmented financial reports have the most
significance? Why?
2. Why do financial statement users (financial analysts, for example) need
information about seg- ments of a firm?
3. Define the following: (a)Operating segment.(b)Reportable segment.
4. Describe the guidelines to be used in determining (a) what constitutes an operating
segment, and (b) whether a specific operating segment is a significant segment.
5. List the three major types of enterprise wide information disclosures required by
SFAS No. 131[ASC 280], and explain how the firm’s designation of reportable
segments affects these disclosures.
6. What segmental disclosures are required, if any, for interim reports?
7. What type of disclosure is required of a firm when the major portion of its
operations takes place within a single reportable segment?
8. List the types of information that must be presented for each reportable segment of
a com-pany under the rules of SFAS No. 131 [ASC 280].
9. Describe the methods that might be used to disclose reportable segment
information.
10. What types of information must be disclosed about foreign operations under
SFAS No. 131[ASC 280–10–50–40]?
11. How are foreign operations defined under SFASNo. 131 [ASC 280]?
12. If the operations of a firm in some foreign countries are grouped into geographic
areas, what factors should be considered in forming the groups?
13. When must a firm present segmental disclosures for major customers? What is the
reason for this requirement?

14. 14. How are common costs distinguished from general corporate expenses for
segmental purposes?
15. What is the purpose of interim financial reporting?
16. Some accountants hold the view that each interim period should stand alone as a
basic ac-counting period, whereas others view each interim period as essentially
an integral part of the annual period. Distinguish between these views.
17.Describe the basic procedure for computing in-come tax provisions for interim
financial state-ments.
18.Describe how changes in estimates should be treated in interim financial
statements.
19.What are the minimum disclosure requirements established ASC 270 for interim
financial reports?
20.What is the general rule regarding the treatment of costs and expenses associated
directly with revenues for interim reporting purposes?
Business Ethics Question from Textbook
SMC Inc. operates restaurants based on various themes, such as Mex-delight, Chinese
for the Buffet, and Steak-it and Eat-it. The Steak-it and Eat-it restaurants have not
been performing well recently, but SMC prefers not to disclose these details for fear
that competitors might use the information to the detriment of SMC. The restaurants
are located in various geographical locations, and management currently measures
profits and losses and asset allocation by restaurant concept. How-ever, when
preparing the segmental disclosures under SFAS No. 131 [ASC 280], the company
reports the segment information by geographical location only. The company recently
hired you to review the financial statements.
1.What disclosures should the company report for segment purposes?
2.The company’s CEO believed that the rules in SFAS No. 131 [ASC 280] are
vague and that the company could easily support its decision to dis-close the
segment data by geographic regions. What would you recommend to the
CEO and how would you approach the issues?