29 Jun Question 36. Estimated gross profit ra
Question
36. Estimated gross profit rates may be used to estimate a company’s cost of goods sold and its ending inventory for:
A. quarterly but not for annual financial statements.
B. both quarterly and annual financial statements.
C. neither quarterly nor annual financial statements.
D. annual but not for quarterly financial statements.
37. Davis Company uses LIFO for all of its inventories. During its second quarter of 2009, Davis experienced a LIFO liquidation. Davis fully expects to replace the liquidated inventory in the early part of the third quarter. How should Davis report the inventory temporarily liquidated on its income statement for the second quarter?
A. Cost of goods sold for the second quarter should include the acquisition cost of the goods temporarily liquidated.
B. Cost of goods sold for the second quarter should include the expected replacement cost of the goods temporarily liquidated.
C. Cost of goods sold for the second quarter should not include the expected replacement cost of the goods temporarily liquidated.
D. Cost of goods sold for the second quarter is not affected by the temporary liquidation of LIFO inventory.
38. How would a company report a change in an accounting principle made on the last day of the third quarter?
A. Retrospective application to all pre-change interim periods reported.
B. No change is required.
C. Apply to current and prospective interim periods only.
D. Apply to prospective interim periods only.
39. Missoula Corporation disposed of one of its segments in the second quarter and incurred a gain from disposal of discontinued segment of $600,000, net of taxes. What is the effect of this gain from disposal of discontinued segment?
A. Increase net income from operations for the year by $600,000.
B. Increase second quarter net income by $600,000.
C. Increase each quarter’s net income by $150,000.
D. Increase each of the last three quarters’ net income by $200,000.
40. Frahm Company incurred a first quarter operating loss before income tax effect of $4,000,000. This is a normal occurrence for Frahm because of seasonal fluctuations. Experience has demonstrated the income earned during the remaining quarters far exceeds the first quarter losses each year. Frahm estimates its annual income tax rate will be 30 percent. What net loss should Frahm report for the first quarter?
A. $4,000,000
B. $2,800,000
C. $700,000
D. $0
41. The income tax expense applicable to the second quarter’s income statement is determined by:
A. dividing the estimated annual income tax expense by four and allocating the amount to the second quarter.
B. multiplying the effective income tax rate times the income before tax for the second quarter.
C. subtracting the income tax expense applicable to the first quarter from the income tax expense applicable to the first two quarters.
D. subtracting the income tax liability applicable to the first quarter from the income tax liability applicable to the first two quarters.
42. Which of the following are established by FASB 131 as “enterprisewide disclosure” standards to provide more information about the risks to a company?
I. Information about dominant industry segments.
II. Information about major customers.
III. Information about geographic areas
A. Both II and III
B. Both I and III
C. Both I and II
D. I, II, and II
43. FASB 131 uses a(n) ______ approach to the definition of segments.
A. line of business
B. entity approach
C. portfolio
D. management
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