Questions about Interim Reporting Required Prepare a brief answ...

Questions about Interim Reporting

Required

Prepare a brief answer to each of the following questions about interim reporting, assuming the company is preparing its Form 10-Q for the third quarter of its fiscal year.

a. How many different income statements would the company present? Describe the reporting periods presented in the income statements.

b. How would the company report a change in accounting principle for depreciation of its building that was made effective the first day of the third quarter? The change was made as a result of an accounting study that concluded that the estimated future benefits from the equipment will be different from those previously expected.

c. How many different balance sheets would the company present? What is the balance sheet date (as of what date) for each balance sheet?

d. Must interim financial statements filed with the SEC be audited by an independent public accountant who would provide an audit opinion on those statements? Explain your answer.

e. Is a company required to present segment information in the interim report? If yes, are the interim segment disclosures different from the annual segment disclosures? Explain your answers.

f. Within what period of time after the end of the quarter must a Form 10-Q be filed with the SEC?

g. May a company use one accounting method for computing interim total revenues and a different accounting method for computing its annual total revenues?

h. Is the company required to physically count its ending inventory each quarter so that it can accurately determine its ending inventory for the balance sheet and its cost of goods sold for the income statement? If not, explain how ending inventory is computed for interim reporting.

i. The company shuts down each year for two weeks during its third quarter to retool its manufacturing lines for the next year’s products. Can the company allocate the costs of retooling incurred in its third quarter to the other three quarters (1, 2, and 4) during the year? If yes, explain how this allocation would be made.

j. How would the company report a change in accounting principle from the completed contract method of revenue recognition to the percentage-of-completion method of revenue recognition on its long-term construction contracts? The change was made on the last day of the third quarter.

k. The company had assumed during the first two quarters of the year that it would receive a material income tax credit from the federal government. However, during the third quarter, the company was informed that it would not be receiving the expected tax credit this year. The company had included the estimated tax credit in the computation of its income tax rate for the first two quarters of the year. Should the company retroactively restate the first two quarters of tax expense because of the change in information received in the third quarter? Explain your answer.