a
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The number of income statements would be presented in third quarter of fiscal year in preparation of Form 10-Q.
a
Answer to Problem 13.9C
In third quarter company would produce four types of income statements.
Explanation of Solution
For the interim reporting in the third-quarter SEC requires four types of income statements in Form 10-Q, as follows:
- An income statement for the third quarter and a comparative income for the third quarter of the previous year.
- An income statement presenting cumulative balances of the first three quarters of the current year and cumulative income statement for the first three quarters of the previous year for comparison.
b
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The reporting of change in the accounting principle for
b
Answer to Problem 13.9C
Change in method of depreciation is required when change in accounting principles takes place.
Explanation of Solution
An accounting study concluded that the estimated future benefit from equipment will be different from those of previous years. The study suggested a change in accounting principle required by FASB 154. It says that change in depreciation method be recognized as the change in accounting estimate is affected by a change in accounting principle.
c
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The types of balance sheets would company present, and what is the date of each
c
Answer to Problem 13.9C
In third quarter company would produce four types of balance sheets.
Explanation of Solution
At the end of the third quarter, the company would report a condensed balance sheet and condensed balance sheet at the end of the previous year. The company should also produce a comparative condensed balance sheet as of the end of the third quarter of the previous fiscal year to facilitate the necessary understanding of seasonal fluctuation of the financial position of the company.
d
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The regulations for interim balance sheet with regards to audit, if the filed balance sheet should be audited or not.
d
Answer to Problem 13.9C
Interim financial statements does not need audit.
Explanation of Solution
The company does not require to file audited financial statements in the interim period, however, it is up to the company’s discretion to file an audited balance sheet, as summary amounts from interim financial statements are included in annual financial reports, and an audited financial statement can be used to review.
e
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The requirement of segment information disclosure in interim report, if it is same as annual disclosures.
e
Answer to Problem 13.9C
Yes segment disclosures are also required in interim report.
Explanation of Solution
FASB 131 requires disclosure of segment information in interim report, but it does not require detailed disclosures as required in annual financial reporting.
f
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The timing of quarterly reporting of Form 10-Q.
f
Answer to Problem 13.9C
Form 10-Q must be filed within 35 days of end of third quarter.
Explanation of Solution
Publicly owned companies must file Form 10-Q within 35 days after the end of each of the first three quarters. If the company does not meet the criteria of accelerated files must file within 45 days after the end of each of the first three quarters.
g
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The method of accounting used for interim reporting and annual, can it use different accounting methods for computing interim and annual total revenues.
g
Answer to Problem 13.9C
The method of computing revenues for interim and annual reporting should be same.
Explanation of Solution
The method of computing interim reporting revenue and annual reporting for financial statements must be the same because it allows easy comparison by users of accounting information. However, if there is a change in accounting principle, it affects the computation of revenue. It must be retrospectively applied to all prior interim periods.
h
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The
h
Answer to Problem 13.9C
Physical count of inventory is not required at the end of each quarter
Explanation of Solution
A physical count of inventory is not required at the end of each quarter although a physical count of inventory is required at the end of the year for
Cost of goods sold = beginning inventory + purchase of inventory − closing inventory
Cost of sales is also estimated using mark-up percentages from cost of retail.
i
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The allocation of retooling cost incurred in third quarter to other three quarters during the year.
i
Answer to Problem 13.9C
Company must allocate retooling cost using a rational method.
Explanation of Solution
When any cost is incurred in a quarter, it is allocated keeping in mind that it benefits the entire year. For example, the cost incurred with retooling efforts is shutdown each year for the purpose of retooling during the short term of the company. There are many allocation methods for such retooling costs. The available methods could be allocating of one-fourth cost to each quarter or allocation of cost to proportional sales revenue during the year. The selection of the allocation method must be done using a rational approach.
j
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The method of reporting change in accounting principle from complete contact method of revenue recognition to the percentage of completion method of revenue recognition on its long-term construction contracts.
j
Answer to Problem 13.9C
Change in accounting method requires retrospective application.
Explanation of Solution
FASB 154 requires retrospective application of a change in accounting principles across all periods, including prior interim periods. The company should be able to determine the effects of the change in previous interim periods, otherwise, the company must wait until the first day of the next fiscal year to make the change.
k
Concept introduction: An interim report is a report for less than one year that provides a continuous update about the performance of the business operating throughout the year. The interim report can be for a week, a month, a quarter, or more than one quarter. Public limited companies are required to publish quarterly reports. It is a similar smaller version of the annual report. SEC requires companies to submit a quarterly report in Form 10-Q within 35 days after the end of each quarter.
The restating of first two quarters of tax expense because of the change in information received in third quarter, under the given conditions.
k
Answer to Problem 13.9C
The change in estimate is treated currently and retrospectively.
Explanation of Solution
Prior interim changes are not restated for change in estimates, but a change in estimate is treated currently and retrospectively. This change in the estimate would be made effective as of the first day of the interim period in which the change is made.
Want to see more full solutions like this?
Chapter 13 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
- Assume the following data for Lusk Inc. before its year-end adjustments: Journalize the adjusting entries for the following: a. Estimated customer allowances b. Estimated customer returnsarrow_forwardAssume the following data for Oshkosh Company before its year-end adjustments: Journalize the adjusting entries for the following: a. Estimated customer refunds and allowances b. Estimated customer returnsarrow_forwardProblem 1. You were engaged for the first time to audit the FS of Bebeko Corporation for the periodended December 31, 2020. The company started its operation in 2018. In reviewing the books, theauditor discovered that certain adjustments had either been overlook or improperly recorded at theend of years to 2020. Omissions and other failures for each year are summarized below:arrow_forward
- Explain how interim financial statements areprepared in a business that closes its accountsonly at year-end.arrow_forwardRequired information [The following information applies to the questions displayed below.] Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Assume that the company's income tax rate is 30% for all items. a. Interest revenue b. Depreciation expense-Equipment c. Loss on sale of equipment d. Accounts payable e. Other operating expenses f. Accumulated depreciation-Equipment g. Gain from settlement of lawsuit Que h. Accumulated depreciation-Buildings i. Loss from operating a discontinued segment (pretax) j. Gain on insurance recovery of tornado damage k. Net sales 1. Depreciation expense-Buildings m. Correction of overstatement of prior year's sales (pretax) n. Gain on sale of discontinued segment's assets (pretax) o. Loss from settlement of lawsuit p. Income tax expense q. Cost of goods sold 4. What is the amount of net income for the year? Net income Debit $ 34,000 25,850 106,400 18,250 52,000 16,000 23,250 ?…arrow_forwardRequired information [The following information applies to the questions displayed below.] Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Assume that the company's income tax rate is 40% for all items. a. Interest revenue b. Depreciation expense-Equipment c. Loss on sale of equipment d. Accounts payable. e. Other operating expenses f. Accumulated depreciation-Equipment g. Gain from settlement of lawsuit h. Accumulated depreciation-Buildings i. Loss from operating a discontinued segment (pretax) j. Gain on insurance recovery of tornado damage k. Net sales 1. Depreciation expense-Buildings m. Correction of overstatement of prior year's sales (pretax) n. Gain on sale of discontinued segment's assets (pretax) o. Loss from settlement of lawsuit p. Income tax expense q. Cost of goods sold. 4. What is the amount of net income for the year? Net income Debit $ 34,100 25,950 106,500 18,350 52,100 16,100 23,850 ?…arrow_forward
- Choose the correct. How should material seasonal variations in revenue be reflected in interim financial statements?a. The seasonal nature should be disclosed, and the interim report should be supplemented with a report on the 12-month period ended at the interim date for both the current and preceding years.b. The seasonal nature should be disclosed, but no attempt should be made to reflect the effect of past seasonality on financial statements.c. The seasonal nature should be reflected by providing pro forma financial statements for the current interim period.d. No attempt should be made to reflect seasonality in interim financial statements.arrow_forwardSoon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett Trucking Company, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2016 to 2019, inclusive. The following data were in the Trucks account as of January 1, 2016: The Accumulated DepreciationTrucks account, previously adjusted to January 1,2016, and duly entered in the ledger, had a balance on that date of 16,460. This amount represented the straight-line depreciation on the four trucks from the respective dates of purchase, based on a 5-year life and no residual value. No debits had been made to this account prior to January 1, 2016. Transactions between January 1,2017, and December 31, 2019, and their record in the ledger were as follows: 1. July 1, 2016: Truck no. 1 was sold for 1,000 cash. The entry was a debit to Cash and a credit to Trucks, 1,000. 2. January 1, 2017: Truck no. 3 was traded for a larger one (no. 5) with a 5-year life. The agreed purchase price was 12,000. Jarrett paid the other company 1,780 cash on the transaction. The entry was a debit to Trucks, 1,780, and a credit to Cash, 1,780. 3. July 1, 2018: Truck no. 4 was damaged in a wreck to such an extent that it was sold as junk for 50 cash. Jarrett received 950 from the insurance company. The entry made by the bookkeeper was a debit to Cash, 1,000, and credits to Miscellaneous Revenue, 50, and Trucks, 950, 4. July 1, 2018: A new truck (no. 6) was acquired for 20,000 cash and debited at that amount to the Trucks account. The truck has a 5-year life. Entries for depreciation had been made at the close of each year as follows: 2016, 8,840; 2017, 5,436; 2018, 4,896; 2019, 4,356. Required: 1. Next Level For each of the 4 years, calculate separately the increase or decrease in earnings arising from the companys errors in determining or entering depreciation or in recording transactions affecting trucks. 2. Prove your work by one compound journal entry as of December 31, 2019; the adjustment of the Trucks account is to reflect the correct balances, assuming that the books have not been closed for 2019.arrow_forwardJack Limited, a newly formed company has requested you as a financial consultant for advice on how to account for provisions, contingent liabilities and contingent assets. The company’s year-end is 31 December. REQUIRED The financial controller of Jack Limited has asked you to prepare a brief report which addresses the following: In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, discuss the recognition criteria for the following: (i) A provision (ii) A contingent liability (iii) A contingent assetarrow_forward
- Marlblestone encountered the following situations during the preparation of its annual financial statements. Identify whether each situation should be considered a "change in estimate," a "change in policy," or "correction of an error." Identify also whether the change should be made retrospectively or prospectively. (a) (b) (c) (d) (e) The company discovered that a new addition to the warehouse had been expensed in a prior period instead of being capitalized and amortized. The company realized that it was using its delivery van much more heavily in its first two years than it would use later, when it would be adding a second delivery van. As a result, the depreciation method was changed from straight-line to double declining balance. When the estimated useful life of the company's equipment was reduced from ten years to five years, the estimated residual value for the equipment was changed from $5,000 to $20,000. The company discovered that it was recording some vendor purchases for…arrow_forwardClassify each of the following accounting practices as conservative or aggressive. 1. Increase the allowance for uncollectible accounts. 2. When costs are rising, change from LIFO to FIFO. 3. Change from declining-balance to straight-line depreciation in the second year of an asset depreciated over 20 years.arrow_forwardWhich of the following would be accounted for as a change in accounting principle? First-time presentation of consolidated financial statements Changing an estimate for the allowance for doubtful accounts Adopting a new accounting standard Changing the useful life of a piece of equipment from 8 years to 20 years O O O Oarrow_forward
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning