APB Opinion No. 28, Interim Financial Reporting, concluded that interim financial reporting should be viewed primarily in which of the following ways?
Choice 'c' is correct. Interim financial reporting should be viewed as reporting for an integral part of an annual period.
Choices 'a', 'b', and 'd' are incorrect, per the above rule.
Which of the following is true regarding the comparison of managerial to financial accounting?
Choice 'd' is correct. Public companies must follow GAAP for (external) financial reporting purposes. GAAP need not be followed for (internal) managerial accounting purposes.
Choice 'a' is incorrect. Financial accounting is generally more precise.
Choice 'b' is incorrect. Managerial accounting has a future focus, while financial accounting focuses on reporting past results.
Choice 'c' is incorrect. The emphasis of financial accounting is providing useful information to financial statement users (including the characteristic of relevance), while the emphasis of managerial accounting is providing timely information to management decision makers.
For interim financial reporting, the computation of a company's second quarter provision for income taxes uses an effective tax rate expected to be applicable for the full fiscal year. The effective tax rate should reflect anticipated:
Choice 'd' is correct. Yes - Yes.
The effective income tax rates for operations for the full year should reflect anticipated foreign tax rates and available tax planning alternatives. In addition, the effect of other anticipated tax credits, capital gains rates, and foreign tax credits should be included.
Hyde Corp. has three manufacturing divisions, each of which has been determined to be a reportable segment. In 1989, Clay division had sales of $3,000,000, which was 25% of Hyde's total sales, and had operating costs of $1,900,000, as reported to the CFO. In 1989, Hyde incurred operating costs of $500,000 that were not directly traceable to any of the divisions. In addition, Hyde incurred corporate interest expense of $300,000 in 1989. In reporting segment information, what amount should be shown as Clay's operating profit for 1989?
Choice 'd' is correct. $1,100,000 operating profit for clay.
Rule: Operating profit by segments is based on the measure of profit reported to the 'chief operating decision maker.'
Allocations for general operating costs and interest, etc., should not be made solely for purposes of segment disclosures.
Which of the following statements best describes an operating procedure for issuing a new Financial Accounting Standards Board (FASB) statement?
Choice 'c' is correct. A new statement from the FASB is issued only after a majority vote of the members of the FASB.
Choice 'a' is incorrect. There is no necessity for the EITF to approve a discussion memorandum
(presumably the question means a discussion memorandum of the FASB statement itself and not an EITF statement) before it is disseminated to the public.
Choice 'b' is incorrect. There is no necessity for an exposure draft to be modified per public opinion before issuing the discussion memorandum (a question can be raised here as to 'what' discussion memorandum'). Exposure drafts are quite/most often modified before they are issued as FASB statements, but they do not have to be. Whether they are or are not modified is a function of whether the FASB thinks they should be modified, partly due to the public comments that have been received.
Choice 'd' is incorrect. There is no way to rescind a new FASB statement, although, in reality, a FASB statement can be rescinded by the issuance of a new statement on the same subject. However, even if there was a way to rescind a new FASB statement, it would not be by a majority vote of the AICPA membership, but by a majority vote of the members of the FASB.
Reporting Net Income
