Chapter 8 Solutions PDF

Chapter 08 - Segment and Interim Reporting
CHAPTER 8
SEGMENT AND INTERIM REPORTING
Answers to Problems
1. D
2. C
3. A
4. C
5. B
6. D
7. C
8. A
9. B
10. B
11. C
12. C
13. C With regard to major customers, U.S. GAAP (FASB ASC 280) only requires
disclosure of the total amount of revenues from each such customer and
the identity of the segment or segments reporting the revenues.
14. D
15. D
16. A
17. C
18. D
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19. C If there has been a material change from the last annual report, total
assets, but not individual assets, for each operating segment must be
disclosed.
20. D
21. D (Determine quantitative threshold under revenue test for reportable

segments)
Sales to outsiders $18,000

Intersegment transfers 3,000
Combined segment revenues $21,000
10% criterion x 10%
Minimum $ 2,100
22. A (Determine quantitative threshold for disclosure of a major customer)
Revenues from a single customer must be disclosed if the amount is 10

percent or more of consolidated sales. Consolidated sales only includes
sales to outsiders; intersegment sales are eliminated.
Consolidated sales (combined sales to outsiders) $376,000

10% criterion x 10%
Minimum $ 37,600
23. D (Determine reportable segments under the profit or loss test)
Total operating losses of $1,020,000 (K and M) are larger than total

operating profits of $770,000. Thus, based on the 10 percent criterion, any
segment with a profit or loss of $102,000 or more must be separately
disclosed. K, O, and P do not meet that standard while L, M, and N do.
24. C (Determine reportable segments under three tests)
Revenues Test
Combined segment revenues $32,750,000
10% criterion x 10%
Minimum $ 3,275,000
8-2
Segments meeting test—A, B, C, E
Profit or Loss Test

Since there are no segments with a loss, this test is applied based on total
combined segment profit.
Combined segment profit $5,800,000
10% criterion x 10%
Minimum $ 580,000
Segments meeting test—A, B, C, E
Asset Test
Combined segment assets $67,500,000
10% criterion x 10%
Minimum $ 6,750,000
Segments meeting test—A, B, C, D, E
Five segments are separately reportable.
25. D
26. B (Determine minimum number of reportable segments under 75% rule)
The test to verify that a sufficient number of industry segments is being

disclosed is based on revenues generated from unaffiliated customers.
The four segments that are to be separately disclosed show outside sales
of $520,000 out of a total for the company of $710,000. Since this portion
is only 73.2 percent of the company’s total, the 75 percent criterion
established by the U.S. GAAP has not been met.
27. C (Determine expense amounts to be recognized in interim period)
Depreciation $60,000 x 1/4 = $15,000

Bonus $120,000 x 1/4 = 30,000
$45,000
8-3
28. C (Determine net income to be reported in interim period)
Income as reported $100,000

Less: Extraordinary loss (recognized in full
in the interim period in which it occurs) (20,000)
Add: Cumulative effect loss (handled through
adjustment of retained earnings balance
at the beginning of the year) 16,000
$ 96,000
29. C (Determine bonus expense to be recognized in interim period)
Bonus $1,000,000 x 1/4 = $250,000
30. C (Determine property tax expense to be recognized in interim period)
Property taxes $480,000 x 1/4 = $120,000
31. C (Journal entry for property tax expense recognized in interim period)
Dr. Property tax expense $120,000

Prepaid property taxes 360,000
Cr. Cash $480,000
32. A (Determine COGS in interim period under LIFO with LIFO liquidation)
5,000 units x $80 = $400,000

300 units x $50 = 15,000
5,300 units $415,000
33. C
5,000 units x $80 = $400,000
300 units x $82 = 24,600
5,300 units $424,600
8-4
34. (10 minutes) (Apply the Profit or Loss Test to Determine Reportable
Operating Segments)
Calculation of profit or loss.
Revenues Intersegment Operating

from Outsiders Transfers Expenses Profit Loss
Cards $1,200,000 + $ 100,000 – $900,000 = $400,000

Calendars 900,000 + 200,000 – 1,350,000 = $250,000
Clothing 1,000,000 – 700,000 = 300,000
Books 800,000 + 50,000 – 770,000 = 80,000
Total $ 780,000 $250,000
Any segment with an absolute amount of profit or loss greater than or equal
to $78,000 (10% x $780,000) is separately reportable. Based on this test, each
of the four segments must be reported separately.
35. (25 minutes) (Apply the Three Tests Necessary to Determine Reportable
Operating Segments)
Revenue Test (numbers in thousands)
Segment Revenues Percentage

Plastics $ 6,425 63.7% (reportable)
Metals 2,294 22.7% (reportable)
Lumber 738 7.3%
Paper 455 4.5%
Finance 186 1.8%
Total $10,098 100.0%
Profit or Loss Test (numbers in thousands)

Segment Revenues Expenses Profit Loss
Plastics $ 6,425 $ 3,975 $2,450 $ (reportable)
Metals 2,294 1,628 666 (reportable)
Lumber 738 967 229
Paper 455 610 155
Finance 186 103 83
Total $3,199 $384
Since $3,199 is larger in absolute terms than $384, it will serve as the basis
for testing. Each of the profit or loss figures will be compared to $319.90
(10% x $3,199).
8-5
Asset Test (numbers in thousands)

Segment Assets Percentage
Plastics $1,363 21.3% (reportable)
Metals 3,347 52.3% (reportable)
Lumber 314 4.9%
Paper 609 9.5%
Finance 768 12.0% (reportable)
Total $6,401 100.0%
The plastics, metals, and finance segments meet at least one of the three
tests and therefore are reportable.
36. (20 minutes) (A Variety of Computational Questions about Operating Segment

and Major Customer Testing)
a. Total revenues for Fairfield (including intersegment revenues) amount to
$4,200,000. Minimum revenues for required disclosure are 10% or
$420,000.
b. Disclosure of operating segments is considered adequate only if the
separately reported segments have sales to unaffiliated customers that
comprise 75% or more of total consolidated sales. In this situation that
requirement is met. Red, Blue, and Green have total sales to outsiders of
$3,137,000 (or 86%) of total consolidated sales of $3,666,000. Thus,
disclosure of these three segments would be adequate.
c. Major customer disclosure is based on a level of sales to unaffiliated
customers of at least 10% or, for Fairfield, $366,600 ($3,666,000 x 10%).
d. This test is based on the greater (in absolute terms) of profits or losses. In
this problem, the total profit of Red, Blue, Green, and White ($1,971,000) is
greater than the total loss of Pink and Black ($316,000). Therefore, any
segment with a profit or loss of $197,100 or more (10% x $1,971,000) is
reportable. Using this standard, Red, Blue, Black, and White are of
significant size.
37. (25 minutes) (Apply the three tests necessary to determine reportable
operating segments and determine whether a sufficient number of segments
is reported)
Problem assigned as graded homework, solution will be provided once students have
submitted their answers
8-6
38. (15 minutes) (Apply materiality tests adopted by a company to determine

countries to be reported separately)
Revenue Test (sales to unaffiliated parties)
United States $4,610,000 80.3%

Spain 395,000 6.9%
Italy 272,000 4.7%
Greece 463,000 8.1%
Total $5,740,000 100.0%
Long-lived Asset Test
United States $1,894,000 83.7%

Spain 191,000 8.4%
8-7
Italy 106,000 4.7%

Greece 72,000 3.2%
Total $2,263,000 100.0%
None of the individual foreign countries meets either the revenue or long-
lived asset materiality test, so no foreign country must be reported
separately. However, information must be presented for the United States
separately and for all foreign countries combined.
39. (20 minutes) (Allocate costs incurred in one quarter that benefit the entire
year and determine income tax expense)
a. Determination of Income by Quarter—Estimated Annual Tax Rate 40%
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Sales $1,000,000 $1,200,000 $1,400,000 $1,600,000
Cost of goods sold (400,000) (480,000) (550,000) (600,000)
Administrative costs (175,000) (180,000) (185,000) (195,000)
Advertising costs (25,000) (25,000) (25,000) (25,000)
Executive bonuses (20,000) (20,000) (20,000) (20,000)
Provision for bad debts (13,000) (13,000) (13,000) (13,000)
Annual maintenance costs (15,000) (15,000) (15,000) (15,000)
Pre-tax income $352,000 $467,000 $592,000 $732,000
Income tax* (140,800) (186,800) (236,800) (292,800)
Net income $211,200 $280,200 $355,200 $439,200
* Calculation of income tax by quarter:
Pre-tax income this quarter $352,000 $467,000 $592,000 $732,000

Cumulative pre-tax income $352,000 $819,000 $1,411,000 $2,143,000
Estimated income tax rate x 40% x 40% x 40% x 40%
Cumulative income tax
to be recognized to date $140,800 $327,600 $564,400 $857,200
recognized in earlier periods -0- 140,800 327,600 564,400
Income tax this quarter $140,800 $186,800 $236,800 $292,800
b. Determination of Income by Quarter—Change in Estimated Annual Tax Rate
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Pre-tax income $352,000 $467,000 $592,000 $732,000
Income tax** (140,800) (186,800) (208,580) (278,160)
Net income $211,200 $280,200 $383,420 $453,840
8-8
39. (continued)
** Calculation of income tax by quarter:
Pre-tax income this quarter $352,000 $467,000 $592,000 $732,000
Cumulative pre-tax income $352,000 $819,000 $1,411,000 $2,143,000
Estimated income tax rate x 40% x 40% x 38% x 38%
to be recognized to date $140,800 $327,600 $536,180 $814,340
recognized in earlier periods -0- 140,800 327,600 536,180
Income tax this quarter $140,800 $186,800 $208,580 $278,160
40. (15 minutes) (Treatment of accounting change made in other than first interim
period)
Retrospective application of the FIFO method results in the following

restatements of income for 2012 and the first quarter of 2013:
2012 2013
1st Q. 2nd Q. 3rd Q. 4th Q. 1st Q.
Sales $10,000 $12,000 $14,000 $16,000 $18,000
Cost of goods sold (FIFO) 3,800 4,600 5,200 6,000 7,400

Operating expenses 2,000 2,200 2,600 3,000 3,200
Income before income taxes 4,200 5,200 6,200 7,000 7,400
Income taxes (40%) 1,680 2,080 2,480 2,800 2,960
Net income $2,520 $3,120 $3,720 $4,200 $4,440
Net income in the second quarter of 2013 is $4,560 [$20,000 – 9,000 – 3,400 =
$7,600 – 3,040 (40%) = $4,560].
The accounting change is reflected in the second quarter of 2013, with year-
to-date information, and comparative information for similar periods in 2012
as follows:
Three Months Ended Six Months Ended

June 30 June 30
2012 2013 2012 2013
Net income $3,120 $4,560 $5,640 $9,000
Net income per common share $3.12 $4.56 $5.64 $9.00
8-9
41. (10 minutes) (LIFO liquidation in interim report)
Determination of Cost-of-Goods-Sold and Gross Profit
Sales (110,000 units @ $20) $2,200,000

Cost-of-goods-sold
100,000 units @ $14 $1,400,000
10,000 units @ $15 (replacement cost) 150,000 1,550,000
Gross profit $650,000
Journal Entries to Record Sales and Cost-of-Goods-Sold
Dr. Cash or Accounts Receivable $2,200,000

Cr. Sales Revenue $2,200,000
Dr. Cost-of-goods-sold $1,550,000
Cr. Inventory $1,520,000
Excess of Replacement Cost over
Historical Cost of LIFO Liquidation 30,000
To record cost-of-goods-sold with a historical cost of $1,520,000 and an excess

of replacement cost over historical cost for beginning inventory liquidated of
$30,000 (($15 – $12) x 10,000 units).
Develop Your Skills
Research Case 1—Segment Reporting (60 minutes)
This assignment requires the student to select a company and find the note
on operating segments in that company’s annual report. The responses to
this assignment will depend upon the company selected by the student for
analysis.
Research Case 2—Interim Reporting (60 minutes)
This assignment requires students to select a company, find the most recent
quarterly report for that company, and then determine whether the company
provides the minimum disclosure required as listed in the text. The
responses to this assignment will depend upon the company selected by the
student for analysis.
8-10
Research Case 3—Operating Segments (60 minutes)
This assignment requires students to find the note on operating segments in

each company's annual report, determine three items of information (answer
three questions) from those notes, and prepare a written summary of their
findings. The primary objective of this requirement is to help students
develop their ability to present such findings in a written format. In
answering these questions, students will become familiar with the different
formats and terminology used by companies in providing operating segment
information. The answers to these questions will change depending upon
the most recent annual report available on the company’s website. The
following general observations indicate how these questions might be
answered.
1. The two most important operating segments in terms of percentage of

total revenues.
The answer to this question is determined by calculating the ratio
“segment revenues/total segment revenues” for each segment of each
company. Companies might use different terms to describe revenues
including net sales and net sales to external customers. Companies are
required to disclose both revenues from sales to external customers
and revenues from intersegment sales. This question should be
answered using revenues from sales to external customers if reported
separately. In 2010, each of the four companies defined operating
segments on the basis of products/services.
2. The two operating segments with the largest growth in revenues.
This question is answered by calculating the ratio “(current year
segment revenues – previous year segment revenues)/previous year
segment revenues” for each segment of each company.
3. The two most profitable operating segments in terms of profit margin.
This question is answered by calculating the ratio “segment
profit/segment revenues” for each segment of each company (again
using revenues from sales to external customers if separately reported).
Segment profit goes under a variety of names including operating
earnings, income from continuing operations, standard margin, and
operating profit. Some companies might provide information for more
than one measure of profit, e.g., income before income taxes and
operating income, in which case the instructor might wish to indicate
which measure of profit to consider in answering this question. There
is no right or wrong measure of profit to use. General Electric does not
include segment profit in its operating segment note, but instead (in
2010) refers the reader to a “Summary of Operating Segments” table (on
page 39 of the annual report), which is part of Management's Discussion
and Analysis.
8-11
After reviewing the information provided by each of these companies in its

segment note, instructors might wish to add additional questions to this
assignment. For example, do these companies use generally accepted
accounting principles in preparing segment information? Does each
company provide a reconciliation to consolidated totals?
Research Case 4—Comparability of Geographic Area Information (60 minutes)
This assignment requires students to find the note on geographic areas in

each company's annual report and then prepare a report describing the
comparability of this information. In preparing this assignment, students will
see the different formats used by companies in providing this information,
and the different levels of detail on geographic areas provided. The
comparability of this information will change depending upon the most
recent annual report available on the company’s website. The following
comparison based upon the 2010 annual reports represents the type of
analysis students might perform in solving this assignment.
Geographic Areas Reported by Four Pharmaceutical Companies

Bristol-Myers Squibb Eli Lilly Merck Pfizer
U.S. U.S. U.S. U.S.
Europe Europe - -
- - E/ME/A -
- - - Developed Europe
Japan, Asia Pacific, and
Canada - - -
- Japan Japan -
Latin America, Middle East,
and Africa - - -
Emerging Markets - - Emerging Markets
- - - Developed Rest of
World
Other Other Other -
The only geographic area that can be directly compared across these four
pharmaceutical companies is the United States. Bristol-Myers Squibb
provides somewhat more detailed information than the other companies.
Only Eli Lilly and Merck report an individual country (Japan) other than the
U.S. Issues that could be discussed include different quantitative thresholds
used by companies in determining what is a material country, and the fact
that disclosure of geographic areas aggregated above the individual country
level (e.g., E/ME/A, Emerging Markets) is not required. One can assume that
Bristol-Myers Squibb does not have a material amount of revenues or assets
in any single country and voluntarily provides information on a more
aggregated, regional basis. The same appears to be true for Pfizer. Eli Lilly
and Merck provide information for a combination of both individual countries
(Japan) and aggregated regional area (Europe, E/ME/A). Pfizer has perhaps
the most different basis for determining geographic areas, focusing on
developed vs. emerging markets.
8-12
Research Case 5—Within Industry Comparison of Segment Information (60

minutes)
The purpose of this assignment is to show students how segment

information can be used to gain insights into the nature and location of a
company’s operations, and give them an opportunity to compare and
contrast this information for two companies in the same industry. The
responses to this assignment will depend upon the companies selected by
the student for analysis. Students should discuss both the operating
segments and geographic areas in which the companies operate. They
might discuss the extent to which the two companies compete with each
other in terms of product lines or geographic areas, as well as the extent to
which this information can be compared. For example, if one company
defines operating segments on the basis of products and another company
in the same industry defines operating segments geographically, meaningful
comparisons between the two companies will be difficult to make.
Accounting Standards Case 1 —Segment Reporting (15 minutes)
Source of guidance: FASB ASC 280-10-55-2: Segment Reporting; Overall;

Implementation Guidance and Illustrations; Operating Segments - Equity
Method Investees
ASC 280-10-55-2 states “An equity method investee could be considered an

operating segment, if, under the specific facts and circumstances being
considered, it meets the definition of an operating segment, even though the
investor has no control over the performance of the investee.”
Thus, in response to the questions asked in the case:

(a) an equity method investment can be treated as an operating segment for
financial reporting purposes,
(b) under the conditions that it meets the definition of an operating
segment, that is, (1) it engages in business activities from which it earns
revenues and incurs expenses, (2) the chief operating decision maker
regularly reviews its operating results to assess performance and make
resource allocation decision, and (3) its discrete financial information is
available.
8-13
Accounting Standards Case 2—Interim Reporting (15 minutes)
Source of guidance: FASB ASC 270-10-50-6: Interim Reporting; Overall;

Disclosure; Contingencies
Contingencies that could be expected to affect the fairness of presentation

of financial data at an interim date must be disclosed in interim reports in the
same manner required for annual reports.
The materiality of a contingency should be judged in relation to annual

financial statements.
Analysis Case—Walmart Interim and Segment Reporting (60 minutes)
1. Assess the seasonal nature of Walmart’s sales and income for the company
as a whole and by operating segment.
The excerpt from Note 18 Quarterly Financial Data shows that Walmart
experienced a significant increase in net sales and income in the quarter
ended January 31 over the previous three quarters of the year. This is not
surprising given that this quarter includes the holiday season.
Operating income for the quarter ended January 31 can be determined for
each segment by subtracting the amounts reported in the three quarterly
reports from the amounts reported in Note 16 Segments.
Walmart Walmart SAM'S

Operating Income U.S. International CLUB
Fiscal Year Ended January 31, 2011 $ 19,914 $ 5,606 $ 1,711
4,
Quarter Ended April 30, 2010 638 1,095 429
4,
Quarter Ended July 31, 2010 879 1,299 428
Quarter Ended October 31, 2010 4,399 1,223 367
Quarter Ended January 31, 2011 $ 5,998 $ 1,989 $ 487
These results show the seasonal nature of the company’s two largest
segments (Walmart U.S. and Walmart International), with a significantly larger
amount of operating income generated in the quarter ended January 31 than in
the other quarters.
8-14
2. Assess Walmart’s profitability by quarter and by segment.
Note 18 can be used to assess profitability in terms of profit margin (Net

income/Net sales) by quarter.
Fiscal Year Ended January 31, 2011
Amounts in millions Q1 Q2 Q3 Q4
Consolidated net income $ 3,444 $ 3,747 $ 3,590 $ 5,178
Net sales 99,097 103,016 101,239 115,600
Net income/Net sales 3.48% 3.64% 3.55% 4.48%
These results indicate that profit margins are highest in the fourth quarter of
the year, the quarter with the largest percentage of total sales.
Note 16 can be used to assess profitability in terms of operating profit margin

(Operating income/Revenues) and return on assets (Operating income/Total
assets) by segment.
Walmart Walmart SAM’S
Fiscal year ended January 31, 2011 U.S. International CLUB
Operating income (loss) $ 19,914 $ 5,606 $ 1,711
Net sales 260,261 109,232 49,459
Operating income/Net Sales 7.65% 5.13% 3.46%
Operating income (loss) $ 19,914 $ 5,606 $ 1,711
Total assets of continuing operations 89,725 72,021 12,531
Operating income/Total assets 22.19% 7.78% 13.65%
These results indicate that Walmart U.S. by far is the most profitable segment
for Walmart Stores, Inc. Although the Walmart International segment has a
reasonable Operating Profit Margin, that segment’s Return on Assets is very
low. Return on Assets must be interpreted with caution, however, because the
ending balance in Total Assets is used in the denominator of the ratio rather
than the average amount of Total Assets for the year. The Walmart
International segment’s Return on Assets (7.78%) is understated, for example,
if a significant portion of Total Assets was acquired late in the year.
8-15
Excel Case—Coca-Cola Geographic Segment Information (60 minutes)
1. The ratios required to be calculated for the Coca-Cola Company are as

follows:
Percentage of total net operating

revenues 2010 2009 2008
Eurasia & Africa 6.96% 6.90% 6.87%
Europe 14.30% 17.30% 17.13%
Latin America 11.22% 10.61% 11.32%
North America 30.52% 25.62% 24.45%
Pacific 14.36% 14.41% 13.86%
Percentage growth in net operating 2009 to 2008 to

revenues 2010 2009
Eurasia & Africa 21.19% -9.37%
Europe -0.81% -8.77%
Latin America 27.03% -15.41%
North America 42.99% -5.36%
Pacific 19.63% -6.16%
Operating income as a percentage of

net operating revenues (profit margin) 2010 2009
Eurasia & Africa 38.34% 31.63%
Europe 56.70% 52.44%

Latin America 58.36% 53.91%
North America 13.57% 21.64%
Pacific 38.85% 38.56%
2. There is no right or wrong answer to this question. Students could argue that
Latin America and Europe would be the areas of the world in which to expand
because profit margin is highest in these areas. There would seem to be more
room to expand in Latin America given that this area has a smaller percentage
of total revenues. In addition, revenue growth in Europe has been negative in
the most recent two years, so expansion might not be feasible in this region.
Eurasia & Africa and Pacific also have relatively high profit margins. The
company generates the smallest percentage of total revenues in Eurasia &
Africa, so perhaps there is an opportunity for growth in this area.
8-16
3. There is a great deal of non-accounting information that one would need to

determine a specific region of the world in which to focus expansion. For
example, one might need to gather information to answer the following
questions:
 Is there a sufficiently large population with enough disposable income to

be able to purchase the company’s products?
 Are raw materials available locally?
 Is there a well-developed transportation infrastructure that would allow the
products to be brought to consumers at a reasonable cost?
 Do local customs, culture, religion, etc. affect drinking habits, especially
the consumption of soft drinks?
8-17

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Chapter 08 - Segment and Interim Reporting

21. D (Determine quantitative threshold under revenue test for reportable

Sales to outsiders $18,000

22. A (Determine quantitative threshold for disclosure of a major customer)

Revenues from a single customer must be disclosed if the amount is 10

Consolidated sales (combined sales to outsiders) $376,000

23. D (Determine reportable segments under the profit or loss test)

Total operating losses of $1,020,000 (K and M) are larger than total

24. C (Determine reportable segments under three tests)

Segments meeting test—A, B, C, E

Profit or Loss Test

Segments meeting test—A, B, C, E

Segments meeting test—A, B, C, D, E

Five segments are separately reportable.

26. B (Determine minimum number of reportable segments under 75% rule)

The test to verify that a sufficient number of industry segments is being

27. C (Determine expense amounts to be recognized in interim period)

Depreciation $60,000 x 1/4 = $15,000

28. C (Determine net income to be reported in interim period)

Income as reported $100,000

29. C (Determine bonus expense to be recognized in interim period)

Bonus $1,000,000 x 1/4 = $250,000

30. C (Determine property tax expense to be recognized in interim period)

Property taxes $480,000 x 1/4 = $120,000

Dr. Property tax expense $120,000

5,000 units x $80 = $400,000

Calculation of profit or loss.

Revenues Intersegment Operating

Cards $1,200,000 + $ 100,000 – $900,000 = $400,000

Revenue Test (numbers in thousands)

Segment Revenues Percentage

Profit or Loss Test (numbers in thousands)

Asset Test (numbers in thousands)

36. (20 minutes) (A Variety of Computational Questions about Operating Segment

38. (15 minutes) (Apply materiality tests adopted by a company to determine

Revenue Test (sales to unaffiliated parties)

United States $4,610,000 80.3%

Long-lived Asset Test

United States $1,894,000 83.7%

Italy 106,000 4.7%

a. Determination of Income by Quarter—Estimated Annual Tax Rate 40%

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

* Calculation of income tax by quarter:

Pre-tax income this quarter $352,000 $467,000 $592,000 $732,000

b. Determination of Income by Quarter—Change in Estimated Annual Tax Rate

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Retrospective application of the FIFO method results in the following

1st Q. 2nd Q. 3rd Q. 4th Q. 1st Q.

Sales $10,000 $12,000 $14,000 $16,000 $18,000

Cost of goods sold (FIFO) 3,800 4,600 5,200 6,000 7,400

Three Months Ended Six Months Ended

41. (10 minutes) (LIFO liquidation in interim report)

Determination of Cost-of-Goods-Sold and Gross Profit

Sales (110,000 units @ $20) $2,200,000

Journal Entries to Record Sales and Cost-of-Goods-Sold

Dr. Cash or Accounts Receivable $2,200,000

To record cost-of-goods-sold with a historical cost of $1,520,000 and an excess

Develop Your Skills

Research Case 1—Segment Reporting (60 minutes)

Research Case 2—Interim Reporting (60 minutes)

Research Case 3—Operating Segments (60 minutes)

This assignment requires students to find the note on operating segments in

1. The two most important operating segments in terms of percentage of