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Flashcards in MISCB Deck (17):
1

On January 15, Tree Co. paid $60,000 in property taxes on its factory for the current calendar year. On April 2, Tree paid $240,000 for unanticipated major repairs to
its factory equipment. The repairs will benefit operations for the remainder of the calendar year. What amount of these expenses should Tree include in its third
quarter interim financial statements for the three months ended September 30?

$95,000

2

In January year I Horner Company paid $80,000 in property taxes on its plant for the calendar year, year I. Also in January year I Horner estimated that its year-
end bonus to executives for year I would be $320,000. What is the amount of the expenses related to these two items that should be reflected in Horner's quarterly
income statement for the 3 months ended June 30, year I (second quarter)?

$100,000

3

During the first quarter of year 2, Lead Co. had income before taxes of $300,000, and its effective income tax rate was 15%. Lead's year I effective annual income
tax rate was 30%, but Lead expects its year 2 effective annual income tax rate to be 25%. In its first quarter interim income statement, what amount of income tax
expense should Lead report?

$75,000

4

A corporation issues quarterly interim financial statements and uses the lower of cost or market method to value its inventory in its annual financial statements.
Which of the following statements is correct regarding how the corporation should value its inventory in its interim financial statements?

Inventory losses generally should be recognized in the interim statements.

5

In general, an enterprise preparing interim financial statements should

use the same accounting principles followed in preparing its latest annual financial statements.

6

During the first quarter of the calendar year, Worth Co. had income before taxes of $100,000, and its effective income tax rate was 15%. Worth's effective annual
income tax rate for the previous year was 30%. Worth expects that its effective annual income tax rate for the current year will be 25%. The statutory tax rate for
the current year is 35%. In its first quarter interim income statement, what amount of income tax expense should Worth report?

$25,000

7

How are discontinued operations and extraordinary items that occur at midyear initially reported?

Included in net income and disclosed in the notes to interim financial statements.

8

For interim financial reporting, which of the following may be accrued or deferred to provide an appropriate cost in each period?
a. Interest
b. Interest and rent
c. Rent
d. Neither

Interest and rent

9

Which of the following statements is true?

IFRS does not mandate interim reporting.

10

For external reporting purposes, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for
a. Interim financial reporting and Year-end financial reporting
b. Interim financial reporting
c. Year-end financial reporting
d. Neither

Interim financial reporting

11

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 financial reporting, the dollar amount of
net inventory should

Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of decrease in the first quarter.

12

Which of the following is an inherent difficulty in the determination of the results of operations on an interim basis?
a. Cost of sales reflects only the amount of product expense allocable to revenue recognized as of the interim date.
b. Depreciation on an interim basis is a partial estimate of the actual annual amount.
c. Revenues from long-term construction contracts accounted for by the peaentage of completion method are based on annual completion and interim estimates may be incorrect.
d. Costs expensed in one interim period may benefit other periods.

Costs expensed in one interim period may benefit other periods.

13

Bard Co., a calendar-year corporation, reported income before income tax expense of $10,000 and income tax expense of $1,500 in its interim income statement for
the first quarter of the year. Bard had income before income tax expense of $20,000 for the second quarter and an estimated effective annual rate of 25%. What
amount should aard report as income tax expense in its interim income statement for the second quarter?

$6,000

14

On January 15, 2010, Forrester Company paid property taxes on its factory building for the calendar year 2010 in the amount of $60,000. The first week of April 2010 Forrester made unanticipated major repairs to its plant equipment at a cost of $240,000 These repairs will benefit operations for the remainder of the calendar year How should these expenses be reflected in Forrester's quarterly income statements?

Mar 31 Jun 30 Sep 30 Dec 31
a. $15,000 $95,000 $95,000 $95,000
b. $15,000 $255,000 $15,000 $15,000
c. $60,000 $240,000 $0 $0
d. $75,000 $75,000 $75,000 $75,

$15,000 $95,000 $95,000 $95,000

15

For interim financial reporting, the computation of a company's second quarter provision for income taxes uses an effective tax rate expected to be applicable for the full fiscal year. This effective tax rate should reflect
a. Neither
b. Foreign tax rates
c. Capital gains
d. Capital gains and Foreign tax rates

Capital gains and Foreign tax rates

16

Harper Co. incurred an apparently permanent inventory loss from market decline of $840,000 during June year I. What amount of the inventory loss should be
recognized in Harper's quarterly income statement for the 3 months ended June 30, year I?

$840,000

17

For interim financial reporting, an extraordinary gain occurring in the second quarter should be

Recognized in the second quarter.