1. An inventory loss from a market price decline occurred in the first quarter, and the decline was not expected to reverse during the fiscal year. However, in the third quarter, the inventory’s market price recovery exceeded the market decline that occurred in the first quarter. For interim financial reporting, the dollar amount of net inventory should:
a Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the decrease in the first quarter
b Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the market price recovery
c Decrease in the first quarter by the amount of the market price decline and not be affected in the third quarter
d Not be affected in either the first quarter or the third quarter
2. Far Corporation had the following transactions during the quarter ended March 31, 2011:
Loss on early extinguishment of debt | $70,000 |
Payment of fire insurance premium for calendar year 2011 | 100,000 |
What amount should be included in Far’s income statement for the quarter ended March 31, 2011?
| Extraordinary Loss | Insurance Expense |
a | $70,000 | $100,000 |
b | $0 | $25,000 |
c | $17,500 | $25,000 |
d | 0 | $100,000 |
3. An inventory loss from a permanent market decline of $360,000 occurred in May 2011. Cox Company appropriately recorded this loss in May 2011, after its March 31, 2011, quarterly report was issued. What amount of inventory loss should be reported in Cox’s quarterly income statement for the three months ended June 30, 2011?
a $0
b $90,000
c $180,000
d $360,000
4. On July 1, 2011, Dol Corporation incurred an extraordinary loss of $300,000, net of income tax saving. Dol’s operating income for the full year ending December 31, 2011, is expected to be $500,000. In Dol’s income statement for the quarter ended September 30, 2011, how much of this extraordinary loss should be disclosed?
a $300,000
b $150,000
c $75,000
d $0
5. In January 2011, Pin Company paid property taxes of $80,000 covering the calendar year 2011. Also in January 2011, Pin estimated that its year-end bonuses to executives would amount to $320,000 for 2011. What is the total amount of expense relating to these two items that should be reflected in Pin’s quarterly income statement for the three months ended June 30, 2011?
a $100,000
b $80,000
c $20,000
d $0
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