(CHP45) PFRS 8 - OPERATING SEGMENT AND INTERIM REPORTING.docx

PFRS 8 – OPERATING SEGMENT 1. An operating segment is a component of an entity a. That engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses relating to transactions with other components of the same entity b. Whose results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance c. For which discrete information is available d. All of these 2. What is the function of the chief operating decision maker? a. To allocate resources to the operating segments only b. To assess the performance of the operating segments only c. To provide information to financial statement users about operating segments d. To allocate resources to the operating segments and assess the performance of operating segments 3. Operating segments are identified on the basis of internal reports about components of an entity that are regularly reviewed by a chief operating decision maker in order to allocate resources to the segment and assess its performance a. Management approach b. Risk and reward approach c. Matrix approach d. Geographical segment approach 4. When is an operating segment is reportable? a. The segment external and internal revenue is 10% or more of the combined external and internal revenue of all operating segments b. The segment profit or loss is 10% or more of the greater between the combined profit of all profitable operating segments and the combined loss of all unprofitable operating segments c. The asset of the segment are 10% or more of the total assets of all operating segments d. All of these 5. Operating segments that do not meet any of the quantitative thresholds a. Cannot be considered reportable b. May be considered reportable and separately disclosed if management believes that information about the segment would be useful to the users of the financial statements c. May be considered reportable if the information is for internal use only d. May be considered reportable and separately disclosed if this is the practice within the economic environment in which the entity operates 6. Which is true concerning the 75% overall size test for operating segments? a. The total external and internal revenue of all reportable segments is 75% or more of the entity’s external revenue b. The total external revenue of all reportable segments is 75% or more of the entity’s external and internal revenue c. The total external revenue of all reportable segments is 75% or more of the entity’s external revenue d. The total internal revenue of all reportable segments is 75% or more of the entity’s internal revenue 7. Revenue of a segment includes a. Only sales to unaffiliated customers b. Sales to unaffiliated customers and intersegment sales c. Sales to unaffiliated customers and interest revenue d. Sales to unaffiliated customers and other revenue and gains 8. All of the following information about each operating segment must be reported, except a. Unusual items b. Interest revenue c. Cost of goods sold

d. Depreciation and amortization expense 9. In presenting segment information, for which of the following must a reconciliation be made? a. Revenue c. Assets and liabilities b. Operating profit or loss d. All of these 10. What is the reasonable upper limit for the number of segment that an entity must disclose? a. Two b. Five c. Six d. Ten 11. Which of the following statements about major customer disclosure is true? a. A major customer is defined as one providing revenue which amounts to 10% or more of the combined external revenue of all operating segments b. The identities of major customers need not be disclosed c. The entity shall disclose the total amount of revenue from major customers and the identity of the segment reporting the revenue d. All of these statements are true about major customer disclosure 12. Aeson company identified the following segments for the current year: Segment Revenue A 10,000,000 B 8,000,000 C 6,000,000 D 3,000,000 E 4,000,000 F 2,000,000 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

Profit 1,750,000 1,400,000 1,200,000 550,000 575,000 525,000

Assets 20,000,000 17,500,000 12,500,000 7,500,000 5,500,000 3,000,000

13. Hazel company had five segments for the current year. Segments A, B and C reported profit of P40,000,000, P15,000,000 and P5,000,0000 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 D c. Segments A, B, C, D and E d. Segments A, B and D 14. Loraine 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 totaled P45,000,000 A. What is the minimum amount of sales to a major customer? a. 5,000,000 c. 4,500,000 b. 4,000,000 d. 6,000,000 B. What is the minimum amount of external revenue to be disclosed by reportable segments? a. 30,000,000 c. 33,750,000 b. 45,000,000 d. 37,500,000 15. Kathleen company and its divisions reported the following for the current year: Sales to unaffiliated customers Intersegment sales of products similar to those sold to unaffiliated customers Interest earned on loans to other operating segments

40,000,000 10,000,000 4,000,000

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 c. 5,000,000

b. 4,000,000

d. 4,400,000

16. Celina company provided the following information for the current year: Segment Aye Bee Cee

Sales 5,000,000 4,000,000 3,000,000

Traceable expenses 3,000,000 2,500,000 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 a segment’s sales to total sales. What is the profit of Segment Cee for the current year? a. 775,000 c. 875,000 b. 525,000 d. 900,000 PAS 34 – INTERIM FINANCIAL REPORTING 1. Interim financial reports shall be published a. Once a year at any time in that year b. Within a month of the half year-end c. On a quarterly basis d. Whenever the entity wishes 2. Interim financial reports should include as a minimum a. A complete set of financial statements b. A condensed set of financial statements and selected notes c. A statement of financial position and income statement only d. A condensed statement of financial position, income statement and statement of cash flows only 3. An entity owns a number of farms that harvest produce seasonally. What is the disclosure suggestion if the business is highly seasonal? a. Additional notes should be written in the interim reports about the seasonal nature b. Disclosure of financial information for the latest and comparative 12-month period in addition to the interim report c. Additional disclosure in the accounting policy note d. No additional disclosure 4. Interim financial reporting should be viewed a. As a special type of reporting that need not follow international financial reporting standards b. As useful only if activity is evenly spread throughout the year so that estimates are unnecessary c. As reporting for an integral part of an annual period d. As reporting for a separate accounting period 5. Which is incorrect concerning presentation of comparative interim financial statements? a. Statement of financial position at the end of the current interim period and comparative statement of financial position at the end of the immediately preceding year b. Income statements for the current interim period and cumulatively for the current year to date with comparative income statement for the immediately preceding year c. Statement of changes in equity cumulatively for the current year to date with comparative statement for the comparable period of the immediately preceding year d. Statement of cash flows cumulatively for the current year to date with comparative statement for the comparable period of the immediately preceding year 6. Joben company reported P6,000,000 net income for the quarter ended September 30, 2015 which included the following after-tax items: A P900,000 gain realized in May 2015 was allocated equally to the second, third and fourth quarters of 2015

A P500,000 cumulative effect loss resulting from a change in inventory valuation method was recognized on August 31, 2015 In addition, the entity paid P200,000 on February 1, 2015, for 2015 calendar-year real property tax. Of this amount, P50,000 was allocated to the third quarter of 2015 What is the net income for the quarter ended September 30, 2015? a. 6,200,000 c. 6,150,000 b. 6,500,000 d. 5,700,000 7. Davis 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, which was 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 charged in the second quarter’s interim financial statements? a. 2,000,000 c. 1,500,000 b. 1,250,000 d. 750,000 8. Ludel company, a calendar-year corporation, has the following income before tax provision and estimated effective annual tax rates for the first three quarters: Quarter First Second Third

Income before income tax 6,000,000 7,000,000 4,000,000

Effective annual tax rate 40% 40% 45%

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