The following statement is an excerpt from the FASB pronouncement related to interim reporting. Interim financial information is essential to provide investors and others with timely information as to the progress of the enterprise. The usefulness of such information rests on the relationship that it has to the annual results of operations. Accordingly, the Board has concluded that each interim period should be viewed primarily as an integral part of an annual period. In general, the results for each interim period should be based on the accounting principles and practices used by an enterprise in the preparation of its latest annual financial statements unless a change in an accounting practice or policy has been adopted in the current year. The Board has concluded, however, that certain accounting principles and practices followed for annual reporting purposes may require modification at interim reporting dates so that the reported results for the interim period may better relate to the results of operations for the annual period.
The following six independent cases present how accounting facts might be reported on an individual company’s interim financial reports. For each of these cases, state whether the method proposed to be used for interim reporting would be acceptable under generally accepted accounting principles applicable to interim financial data. Support each answer with a brief explanation.
d) Gansner Company realized a large gain on the sale of investments at the beginning of the second quarter. The company wants to report one-third of the gain in each of the remaining quarters.
It is not acceptable under GAAP.
The standards board is the authority that guides companies to regulate their business and is useful for recording business transactions in the book of accounts. It is also known as Financial Accounting Standard Board.
If gains on the sale of investments happened at the end of the year, they would not be delayed. As a result, they should not be delayed to future intermediate periods and should instead be reported in the quarter in which the gain occurred.
(Horizontal and Vertical Analysis) Presented below is the comparative balance sheet for Gilmour Company.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2018 AND 2017
Accounts receivable (net)
Plant & equipment
Liabilities and Stockholders’ Equity
(Round to two decimal places.)
Cineplex Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2018.
Cost of goods sold
Operating profit (loss)
Sales of segments B and C included intersegment sales of $20,000 and $100,000, respectively.
(b) Prepare the necessary disclosures required by GAAP.
Snider Corporation, a publicly-traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first quarter of the 2017–2018 fiscal year. Snider’s financial accounting department has compiled the following summarized revenue and expense data for the first quarter of the year.
Sales revenue $60,000,000
Cost of goods sold 36,000,000
Variable selling expenses 1,000,000
Fixed selling expenses 3,000,000
Included in the fixed selling expenses was the single lump-sum payment of $2,000,000 for television advertisements for the entire year.
b) What financial information, as a minimum, must Snider Corporation disclose to its shareholders in its quarterly reports?
94% of StudySmarter users get better grades.Sign up for free