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    Interim Financial Reporting: Problem 45-1: True or False

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    Marjorie
    This document contains sample problems and solutions related to interim financial reporting. It includes multiple choice and computational problems on topics such as recognizing revenues and expenses over interim periods, accounting for taxes on interim profits, and determining weighted average tax rates. The computational problems provide numerical data and require the calculation and presentation of interim income statements, tax expenses, and other interim financial information.

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    Interim Financial Reporting: Problem 45-1: True or False

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    Marjorie
    295 views7 pages
    This document contains sample problems and solutions related to interim financial reporting. It includes multiple choice and computational problems on topics such as recognizing revenues and expenses over interim periods, accounting for taxes on interim profits, and determining weighted average tax rates. The computational problems provide numerical data and require the calculation and presentation of interim income statements, tax expenses, and other interim financial information.

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    This document contains sample problems and solutions related to interim financial reporting. It includes multiple choice and computational problems on topics such as recognizing revenues and expenses over interim periods, accounting for taxes on interim profits, and determining weighted average tax rates. The computational problems provide numerical data and require the calculation and presentation of interim income statements, tax expenses, and other interim financial information.

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    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    295 views7 pages

    Interim Financial Reporting: Problem 45-1: True or False

    Uploaded by

    Marjorie
    This document contains sample problems and solutions related to interim financial reporting. It includes multiple choice and computational problems on topics such as recognizing revenues and expenses over interim periods, accounting for taxes on interim profits, and determining weighted average tax rates. The computational problems provide numerical data and require the calculation and presentation of interim income statements, tax expenses, and other interim financial information.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 7

    Chapter 45

    Interim Financial Reporting

    PROBLEM 45-1: TRUE OR FALSE


    1. FALSE 6. FALSE
    2. TRUE 7. FALSE
    3. FALSE 8. TRUE
    4. TRUE 9. FALSE
    5. FALSE 10. TRUE

    PROBLEM 45-2: IDENTIFICATION


    1. IMMEDIATELY
    2. IMMEDIATELY
    3. IMMEDIATELY
    4. IMMEDIATELY
    5. SPREAD OUT
    6. SPREAD OUT
    7. IMMEDIATELY
    8. SPREAD OUT
    9. IMMEDIATELY
    10. IMMEDIATELY
    11. IMMEDIATELY
    12. IMMEDIATELY
    13. SPREAD OUT
    14. SPREAD OUT
    15. IMMEDIATELY

    PROBLEM 45-3: MULTIPLE CHOICE – THEORY


    1. D 6. C
    2. C 7. B
    3. A 8. C
    4. D 9. C
    5. D 10. A

    1
    PROBLEM 45-4: THEORY & COMPUTATIONAL
    1. D

    2. A

    3. B

    4. B

    5. B

    6. C

    7. A

    8. Solution:

    Revenue 9,000,000
    Cost of goods sold (5,000,000)
    Gross profit 4,000,000
    Other operating expenses (2,800,000)
    Loss on inventory write-down (2.2M – 2.8M) (600,000)
    Interest income (2M x 12% x 3/12) 60,000
    Profit 660,000
    Other comprehensive income:
    Unrealized loss on FVOCI [450K – (500K + 60K)] (110,000)
    Comprehensive income 550,000

    9. Solution:
    Revenue 7,000,000
    Cost of goods sold (3,000,000)
    Gross profit 4,000,000
    Other operating expenses (2,800,000)
    Property tax expense (1.2M x 1/4) (300,000)
    Depreciation expense [(1.2M / 5) x 3/12] (60,000)
    Insurance expense (15,000)
    Profit 825,000
    Other comprehensive income:
    Revaluation increase (4.4M - 3.8M) 600,000
    Comprehensive income 1,425,000

    2
    10. Solution:

    Revenue 9,000,000
    Cost of goods sold (3,000,000)
    Gross profit 6,000,000
    Other operating expenses (2,800,000)
    Salaries expense (2.8M x 3/12) (700,000)
    Impairment loss (500,000)
    Profit from continuing operations 2,000,000
    Discontinued operations (700,000)
    Profit for the year 1,300,000

    11. Solution:

    Estimated annual profit before tax 1,200,000


    Less: Operating loss carryforward (300,000)
    Total 900,000
    Multiply by: 30%
    Estimated annual income tax expense 270,000
    Divide by: Estimated annual profit before tax 1,200,000
    Weighted average income tax rate 22.50%

    Profit before tax - 1st quarter 350,000


    Multiply by: Weighted ave. tax rate 22.50%
    Income tax expense 78,750

    PROBLEM 45-5: MULTIPLE CHOICE – COMPUTATIONAL


    1. B 70,000 loss recognized immediately; (100,000 x ¼) = 25,000
    insurance expense allocated to the quarter

    2. C
    Solution:
    Depreciation expense (60,000 x 6/12) 30,000
    Salaries expense - bonus (120,000 x 6/12) 60,000
    Total expense for the semi-annual period 90,000

    3. B
    Solution:
    Property tax (180,000 x 1/4) 45,000
    Costs benefitting the remainder of the year (300,000 x 1/3) 100,000
    Total expense for the 2nd quarter 145,000

    3
    4. C

    5. B (-20,000 - 30,000 + 90,000) = 40,000

    6. C (200,000 x 25%) = 50,000

    7. C – The entire write-down of 900,000 is recognized in the 2nd


    quarter.

    8. D

    9. C

    10. B

    Solution:
    Estimated annual profit before tax 1,200,000
    Less: Operating loss carryforward (120K / 30%) (400,000)
    Total 800,000
    Multiply by: 30%
    Estimated annual income tax expense 240,000
    Divide by: Estimated annual profit before tax 1,200,000
    Weighted average income tax rate 20.00%

    1st Qtr. 2nd Qtr. 3rd Qtr.


    Profits before taxes 350,000 200,000 400,000
    Multiply by: Weighted ave. tax
    20.00% 20.00% 20.00%
    rate
    Income tax expense 70,000 40,000 80,000

    4
    PROBLEM 45-6: EXERCISES – COMPUTATIONAL

    1. Solution:

    Revenue 9,000,000
    Cost of goods sold (5,000,000)
    Gross profit 4,000,000
    Other operating expenses (2,800,000)
    Property tax expense (250,000)
    Impairment loss (600,000)
    Loss 350,000

    The write-up is not recognized because there are no write-downs in the past.

    2. Solution:

    Revenue 9,000,000
    Cost of goods sold (5,000,000)
    Gross profit 4,000,000
    Other operating expenses (2,800,000)
    Insurance expense (60K x 3/24) (7,500)
    Commission expense (80,000)
    Unrealized gain (1.45M - 1.5M) (50,000)
    Profit from continuing operations 1,062,500
    Discontinued operations (2.8M - 3M) + 800K (1,000,000)
    Profit for the year 62,500
    Other comprehensive income: -
    Comprehensive income 62,500

    3. Solution:

    Revenue 9,000,000
    Cost of goods sold (5,000,000)
    Gross profit 4,000,000
    Other operating expenses (2,800,000)
    Employee benefits (450,000)
    Depreciation expense (see solution below) (45,000)
    Interest income (1.2M x 10% x 3/12) 30,000
    Profit for the year 735,000

    By trial and error, the depreciation method used by Puppy is determined to be


    the SYD method.

    Trial and error:


    Historical cost (squeeze) 1,000,000

    5
    Accumulated depreciation (540,000)
    Carrying amount - 1/1/x1 460,000

    Historical cost 1,000,000


    Residual value (100,000)
    Depreciable amount 900,000

    Depreciation - 1st yr. (900K x 5/15) 300,000


    Depreciation - 2nd yr. (900K x 4/15) 240,000
    Accumulated depreciation - 1/1/x1 540,000

    Depreciation - 20x1 (900K x 3/15) 180,000


    Multiply by: 3/12
    Depreciation - 1st qtr. 45,000

    4. Solution:
    Estimated annual profit before tax 1,200,000
    Less: Operating loss carryforward (300K / 30%) (1,000,000)
    Total 200,000
    Multiply by: 30%
    Estimated annual income tax expense 60,000
    Divide by: Estimated annual profit before tax 1,200,000
    Weighted average income tax rate 5.00%

    Profit before tax - 1st quarter 350,000


    Multiply by: Weighted ave. tax rate 5.00%
    Income tax expense 17,500

    5. Solution:
    Estimated annual profit before tax 800,000
    Less: Operating loss carryforward (100,000)
    Total 700,000
    Multiply by: 30%
    Estimated annual income tax expense 210,000
    Divide by: Estimated annual profit before tax 800,000
    Weighted average income tax rate 26.25%

    Profit before tax - 1st quarter 280,000


    Multiply by: Weighted ave. tax rate 26.25%

    6
    Income tax expense 73,500

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