Question 1. The Ajax Corp reported the following operating results and net income (net loss) from its components for the year ended December 31:
Component Net eliminations Consolidated
Astor $215,000 $(120,000) $95,000
Bejax 30,000 0 30,000
Carter (180,000) 50,000 (130,000)
Davis 80,000 (50,000) 0
Elbow (20,000) 20,000 0
$125,000 $(100,000) $25,000
Based purely on operating results, which of the components would be deemed reportable segment?
A. Astor, Bejax, Carter, Davis, and Elbow
B. Astor, Bejax, Carter, and Elbow
C. Astor, Bejax, and Davis
D. Astor, Carter, and Davis
Question 2. Users of financial statements frequently rely upon the data displayed in the financial statements to predict future financial outcomes. Financial accounting concepts refer to the characteristic of accounting information that provides predictive to users as the quality of:
A. Relevance
B. Reliability
C. Comparability
D. Understandibility
Question 3. ABC Corp changed its inventory costing method from last-in, first-out (LIFO) to first-in, first-out (FIFO). Assuming there is adequate justification for the change, ABC would:
A. Report the change on its income statement as a component of income form continuing operations, before tax.
B. Report the cumulative effect of the change on its income statement, net of tax, after income from continuing operations but before discontinued operations or extraordinary items.
C. Report the cumulative effect of the change on its income statement, net of tax, after income from continuing operations, discontinued operations, and extraordinary items.
D. Report the cumulative effect of the change as an adjustment to beginning retained earnings, net of tax.
Question 3. XYZ Corp is a component of 123 INC and has been losing $50,000 per month. On April 1, Year 1, 123, INC's management committed to a plan for the immediate sale XYZ and fully expected to find a buyer for the component by March of Year 2. The book value of the component's asset is $800,000, while the fair market value of the assets of $650,000. 123, INC sold XYZ on Feb 28 Year 2 for $550,000. 123, INC's loss from discontinued operations before consideration of taxes for the year ended Dec 31, Year 1, would be:
A. $600,000
B. $750,000
C. $850,000
D. $950,000
Question 4. Timber Co, was evaluating the likelihood of collecting various accounts receivable currently on its books. This evaluation resulted in the decision to change from the direct recognition method to the installment method for recognizing receivables. The accounting treatment for this change is best characterized as:
A. Prospective
B. Cumulative
C. Retroactive
D. Restatement