BALIUAG UNIVERSITY

CPA REVIEW

FINANCIAL ACCOUNTING PROBLEMS FAR-2017-30

OPERATING SEGMENT AND INTERIM REPORTING

1. W COMPANY identified the following segments for the current year:

Segment Revenue Profit Assets

A 10,000,000 1,750,000 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,000,000 575,000 5,500,000
F 2,000,000 525,000 3,000,000

What are the reportable segments?

a. Segments A, B and C
b. Segments A, B, C and D
c. Segments A, B, C, D and E
d. Segments A, B, C, D, E and F

2. X COMPANY had five segments for the current year. Segments A, B and C reported
profit of P40,000,000, P15,000,000 and P5,000,000 respectively. Segments D and E
reported loss of P20,000,000 and P4,000,000 respectively. What are the reportable
segments based on profit or loss?

a. Segments A, B and C
b. Segments A, B, C and E
c. Segments A, B, C, D and E
d. Segments A, B and D

3. Y COMPANY reported revenue of P50,000,000, excluding intersegment sales of

P10,000,000, expenses of P47,000,000 and net income of P3,000,000 for the current
year. expenses included payroll costs of P15,000,000. The combined assets of all
segments at year-end totalled P45,000,000.

1. What is the minimum amount of sales to a major customer

a. 5,000,000
b. 4,000,000
c. 4,500,000
d. 6,000,000

2. What is the minimum amount of external revenue to be disclosed by reportable

segments?

a. 30,000,000
b. 45,000,000
c. 33,750,000
d. 37,500,000

4. Z COMPANY and its division reported the following for the current year:

Sales to unaffiliated customers 40,000,000

Intersegment sales of products similar to those sold to unaffiliated 10,000,000
customers
Interest earned on loans to other operating segments 4,000,000

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 BALIUAG UNIVERSITY
CPA REVIEW

FINANCIAL ACCOUNTING PROBLEMS FAR-2017-30

The entity and all of its divisions are engaged solely in manufacturing operations.
What is the minimum amount of revenue of a segment to be classified as reportable
segment?

a. 5,400,000
b. 4,000,000
c. 5,000,000
d. 4,400,000

5. A COMPANY provided the following information for the current year:

Segment Sales Traceable expenses

Aye 5,000,000 3,000,000
Bee 4,000,000 2,500,000
Cee 3,000,000 1,500,000

Additional expenses are P2,000,000 indirect expenses, P1,000,000 general corporate

expenses, P500,000 interest expense and P400,000 income tax expense. The interest
expense and income tax expense are regularly reviewed by the chief operating
decision maker as a measure of profit or loss. Appropriate common expenses are
allocated to segments based on the ratio of segment sales to total sales. What is the
profit of Segment Cee for the current year?

a. 775,000
b. 525,000
c. 875,000
d. 900,000

6. B COMPANY reported P950,000 net income for the quarter ended September 30, 2017
which included the following after-tax items:

A P600,000 expropriation gain realized in May 2017 was allocated equally to the
second, third and fourth quarters of 2017.

A P160,000 cumulative effect loss resulting from a change in inventory valuation

method was recognized on August 31, 2017.

In addition, the entity paid P480,000 on February 1, 2017, for 2017 calendar-year real
property tax. Of this amount, P120,000 was allocated to the third quarter of 2017.

What is the net income for the quarter ended September 30, 2017?

a. 1,030,000
b. 1,110,000
c. 1,150,000
d. 910,000

7. C COMPANY paid P72,000 to renew its only insurance policy for three years on March
1, 2017, the effective date of the policy. On March 31, 2017, the unadjusted trial
balance showed a balance of P3,000 for prepaid insurance and P72,000 for insurance
expense. What amounts should be reported respectively for prepaid insurance and
insurance expense in the financial statements for the three months ended March 31,
2017?

a. 70,000 and 3,000

b. 70,000 and 5,000
c. 72,000 and 3,000

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 BALIUAG UNIVERSITY
CPA REVIEW

FINANCIAL ACCOUNTING PROBLEMS FAR-2017-30

d. 73,000 and 2,000

8. D COMPANY prepares quarterly interim financial reports. The entity sells electrical
goods and normally 5% of customers claim on their warranty. The provision in the
first quarter was calculated as 5% of sales to date. The sales in the first quarter
amounted to P10,000,000. However, in the second quarter, a design fault was found
and warranty claims were expected to be 10% for the whole year. sales in the second
quarter were P15,000,000. What would be the provision for warranty charged in the
interim financial statements for the second quarter?

a. 2,000,000
b. 1,250,000
c. 1,500,000
d. 750,000

9. E COMPANY, a calendar year corporation, had the following income before tax
provision and estimated effective annual tax rates for the first three quarters:

Quarter Income before income Effective annual tax

tax rate
First 6,000,000 40%
Second 7,000,000 40%
Third 4,000,000 45%

What is the income tax provision in the interim income statement for the third
quarter?
a. 1,800,000
b. 2,450,000
c. 2,550,000
d. 7,650,000