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Exam 17: Interim Period Reporting

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Question 1

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In interim reporting, changes in accounting principles that are made in other than the first interim reporting quarter are to be accounted for ________________________________________.

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Question 2

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_____ Cableco estimated its annual effective income tax rate to be 40% at the end of its first quarterly interim period for 2006. At the end of the third quarter for 2006, Cableco revised its estimated annual effective income tax rate to be 36%. Cableco had pretax income of $1,000,000 for each of the first three quarters and expects earnings for the fourth quarter to be $2,000,000. What amount should be reported for income tax expense in the third quarter interim report for the year-to-date (nine month) results?

A) $1,080,000
B) $1,120,000
C) $1,160,000
D) $1,200,000
E) None of the above.

F) A) and B)
G) B) and D)

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Question 3

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______ Cableco estimated its annual effective income tax rate to be 40% at the end of its first quarterly interim period for 2006. At the end of the third quarter for 2006, Cableco revised its estimated annual effective income tax rate to be 36%. Cableco had pretax income of $1,000,000 for each of the first three quarters and expects earnings for the fourth quarter to be $2,000,000. What amount should be reported for income tax expense for the third quarter in the third quarter interim report?

In interim reporting, an interim period is considered a part of an annual period under the ___________________________view.

_____ Property taxes may be accrued or deferred to provide an appropriate cost in each period for

Quarterly financial reporting is a requirement under GAAP as promulgated by the FASB and its predecessor organizations.

_____ For interim financial reporting, which of the following items may be prorated over each of the quarters instead of being expensed in the quarter in which incurred or paid? $\begin{array} { l c c } & \text { Property Taxes } & \text { Rent } \\\text { a. } & \text { No } & \text { No } \\\text { b. } & \text { No } & \text { Yes } \\\text { c. } & \text { Yes } & \text { Yes } \\\text { d. } & \text { Yes } & \text { No }\end{array}$ $\begin{array} { l c c } & \text { Legal Fees Relating to } & \text { Annual Audit } \\& \text { Preparing Annual 10-K Report } & \text { Fees } \\\text { a. } & \text { Yes } & \text { Yes } \\\text { b. } & \text { Yes } & \text { No } \\\text { c. } & \text { No } & \text { Yes } \\\text { d. } & \text { No } & \text { No }\end{array}$

Certified public accountants of publicly owned companies are required to review interim financial reports prior to their release.

Under APB Opinion No. 28, either a condensed or a complete income statement is to be included in interim financial reports.

_____ Under APB Opinion No. 28, interim financial reports are to include, as a minimum,

Under APB Opinion No. 28, changes in accounting estimates are required to be accounted for in the first interim reporting period.

The inclusion of quarterly financial data in the annual report to stockholders is voluntary for publicly owned companies.

Under the discrete view, the period of time for which results of operations are being determined should not influence how such transactions and events should be reported.

The objective of interim reporting is to use the same accounting principles and practices used in preparing annual financial statements.

Under APB Opinion No. 28, extraordinary items must be reported in the interim period in which they occur.

_____ Interim financial reports issued by publicly owned companies

_____ In January 2006, Nollex paid property taxes of $20,000 covering the calendar year 2006. Also in January 2006, Nollex estimated tht its year-end bonuses to factory workers would be $80,000 for 2006. In Nollex's quarterly income statement for the three months ended 3/31/06, what is the total amount of expense relating to these two items that should be reported?

Under APB Opinion No. 28, certain costs and expenses (other than product costs) that clearly benefit more than one interim period ______________________________ be allocated among interim periods benefited.

Temporex had 1,000 units of an item on hand at the beginning of 2006, which were valued at their acquisition cost of $10 per unit. No additional purchases of this item occurred during 2006. For simplicity, assume that no sales of this item were made in 2006. The replacement cost (assumed to be market) at the end of each quarter follows: Required: Determine the charge or credit, if any, to be made to earnings for each quarter of 2006.

_____ For interim financial reporting, which of the following may be accrued or deferred to provide an appropriate cost in each period?