topic disclosures regarding major customers lo 1 11 which of the following statement 4314264

topic disclosures regarding major customers lo 1 11 which of the following statement 4314264

Topic: Disclosures Regarding Major Customers

LO: 1

11.Which of the following statements about disclosures of major customers is true?

a.Companies must disclose information about the extent of their reliance on major customers if revenues from transactions with a single external customer amount to 5% or more of the company’s total revenues

b.Companies must disclose information about the extent of their reliance on major customers if revenues from transactions with a single external customer amount to 10% or more of the company’s total revenues.

c.Companies must disclose information about the extent of their reliance on major customers if revenues from transactions with a single external customer amount to 15% or more of the company’s total revenues.

d.Companies must disclose information about the extent of their reliance on major customers if revenues from transactions with a single external customer amount to 20% or more of the company’s total revenues.

Topic: Interim Financial Reporting – Philosophy

LO: 2

12.Which of the following statements about the philosophy underlying interim financial reporting is true?

a.Companies are allowed to adjust their revenue and expense recognition policy in order to achieve favorable year-over-year comparisons as long as sales and net income for the year as a whole would not be affected.

b.Each interim period is accounted for independently using customary revenue and expense recognition policies.

c.Each interim period should be viewed primarily as an integral part of an annual period.

d.None of the above are true.

Topic: Interim Financial Reporting – Inventories

LO: 2

13.Which of the following statements is false regarding the interim financial reporting of inventories?

a.Accounting standards permits companies to use estimated gross profit rates to determine the cost of goods sold during interim periods.

b.LIFO liquidation computation should be done with respect to the entire year, not just the current reporting period.

c.Reduction for lower of cost or market need not be recognized if we expect market prices for the affected inventory to recover by year-end.

d.Standard cost variance analysis must be performed and recognized with respect to the interim period only.

Topic: Interim Financial Reporting – Costs Benefitting More Than One Period

LO: 2

14.Which ofthe following does not accurately describe the accounting for costs benefitting more than one period?

a.Quantity discounts should be recognized in the interim period, even if the annual purchase level has not yet been made if the company expects that the annual sales volume will be sufficient for the customer to receive the discount.

b.The estimated annual cost of property taxes, if they can be reliably estimated, should be apportioned equally to interim reporting periods.

c.Bonus payments based on sales targets should only be recognized in the period in which the target is met or exceeded.

d.Advertising expense should be allocated over the interim reporting periods that benefit from the expenditure, even if paid in only one reporting period.

Topic: Interim Financial Reporting – Taxes

LO: 2

15.Which ofthe following best describes the accounting for costs benefitting more than one period?

a.Accounting standards requires companies to estimate the effective tax rate expected to be applicable for the full fiscal year and to use that rate in computing income taxes in an interim period.

b.Companies must estimate the effective tax rate for all interim reporting periods independently.

c.Companies are required to use the statutory tax rate for each interim reporting period and to adjust to the effective tax rate at the end of the year.

d.The tax rate used for interim reporting periods should not reflect tax benefits resulting from investment tax credits, foreign tax rates, and the like, unless those benefits are certain.

Topic: Interim Financial Reporting – Extraordinary Items

LO: 2

16. Which ofthe following best describes the accounting for extraordinary items?

a.Extraordinary gains and losses should only be reported in the annual income statement, not in interim income statements.

b.Extraordinary losses should be reported, but not extraordinary gains.

c.Extraordinary items should be disclosed separately and included in the determination of net income for the interim period in which they occur, providing that they are material.

d.Extraordinary items should be disclosed separately and included in the determination of net income for the interim period in which they occur, regardless of dollar amount.

Topic: Interim Financial Reporting – Changes in Accounting Principles and Estimates

LO: 2

17.Which ofthe following does not describe the accounting for changes in accounting principles and estimates?

a.In order to maintain comparability of the financial information across interim reporting periods, the FASB recommends that companies adopt any accounting changes during the first interim period of a fiscal year.

b.Whenever a change in accounting principles is made, accounting standards require that the change be made retrospectively, with a cumulative adjustment to the beginning balance of assets and liabilities affected by the change in the earliest period reported, and an offsetting adjustment to Retained Earnings.

c.When a change in accounting principle is made in an interim period, the effect of the change on prior interim periods should be made retrospectively by adjusting each prior interim financial statement for the effects of the change.

d.All of the above

e.Both a and c

Topic: Interim Financial Reporting Disclosures

LO: 2

18.Which of the following are required disclosures in interim financial statements?

a.Footnote discussions of seasonal revenue, costs or expenses

b.Footnote discussions of contingent items

c.Footnote discussions of changes in accounting principles

d.All of the above

e. Both aand c

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