Select the best answer for each of the following.
1. Which of the following is nota consideration in segment reporting for diversified companies?
(a) Consolidation policy.
(b) Defining the segments.
(c) Transfer pricing.
(d) Allocation of joint costs.
2. Cream Company operates in three different industries, each of which is appropriately regarded as a reportable segment. Segment No. 1 contributed 60% of Cream Company’s total sales. Sales for Segment No. 1 were $450,000 and traceable costs were $200,000. Total common costs for Cream were $300,000. Cream allocates common costs on the basis of the ratio of a segment’s sales to total sales, an appropriate method of allocation. What should be the operating profit presented for Segment No. 1 for the year?
(a) $270,000.
(b) $70,000.
(c) $180,000.
(d) $250,000.
3. The profitability information that should be reported for each reportable segment of a business enterprise consists of
(a) An operating profit or loss figure consisting of segment revenues less traceable costs but not allocated common costs.
(b) An operating profit or loss figure consisting of segment revenues less allocated common costs but not traceable costs.
(c) An operating profit or loss figure consisting of segment revenues less traceable costs and allocated common costs.
(d) Segment revenues only.
4. In financial reporting for segments of a business enterprise, the operating profit or loss of a segment should include
(a) Revenue from other segments.
(b) Federal income taxes.
(c) Interest expense even though the segment’s operations are not principally of a financial nature.
(d) Any of the above, if it is included in the measures reviewed by the chief operating decision maker.
5. A company that uses the LIFO method of inventory pricing finds at an interim reporting date that there has been a partial liquidation of the base period inventory level. The decline is considered temporary and the partial liquidation will be replaced before year-end.
The amount shown as inventory at the interim reporting date should
(a) Be shown at the actual level, and cost of sales for the interim reporting period should reflect the decrease in the LIFO base period inventory level.
(b) Not give effect to the LIFO liquidation, and cost of sales for the interim reporting period should reflect the decrease in the LIFO base period inventory level.
(c) Not give effect to the LIFO liquidation, and cost of sales for the interim reporting period should include the expected cost of replacement of the liquidated LIFO base.
(d) Be shown at the actual level, and the decrease in inventory level should not be reflected in the cost of sales for the interim reporting period.
6. Which of the following is an inherent difficulty in determination of the results of operations on an interim basis?
(a) Costs expended in one interim period may benefit other periods.
(b) Depreciation on an interim basis is a partial estimate of the actual annual amount.
(c) Cost of sales reflects only the amount of product expense allocable to revenue recognized as of the interim date.
(d) Revenues from long-term construction contracts accounted for by the percentage-of-completion method are based on annual completion, and interim estimates may be incorrect.
7. In considering interim financial reporting, how did the Accounting Principles Board conclude that such reporting should be viewed?
(a) As useful only if activity is evenly spread throughout the year so that estimates are un-necessary.
(b) As a “special” type of reporting that need not follow generally accepted accounting principles.
(c) As reporting of an integral part of an annual period.
(d) As reporting of a basic accounting period.
8. Which of the following methods of inventory valuation is allowable at interim dates but not at year-end?
(a) Estimated gross profit rates.
(b) Retail method.
(c) Specific identification.
(d) Weighted average.