Problem: The unaudited quarterly statements of income issued by many corporations to their stockholders are usually prepared on the same basis as annual statements, their statement for each quarter reflecting the transactions of that quarter.
Required to do:
Q1. Why do problems arise in using such quarterly statements to predict the income (before extraordinary items) for the year? Explain.
Q2. Discuss the ways in which quarterly income can be affected by the behavior of the costs recorded in a repairs and maintenance of factory machinery account.
Q3. Do such quarterly statements give management opportunities to manipulate the results of operations for a quarter? If so, explain or give an example.