Reference no: EM13974020
K Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its stockholders and the SEC for the fiscal year ending December 31, 2014. Your job as a member of the accounting team is to help determing the appropriate disclosures and any other potential year end adjustments. You have collected the following information.
1. K is involved in four separate industries. The following information is available for each of the four industries. K wonders which segments are reportable.
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Operating Segment
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Total Revenue
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Operating Profit(Loss)
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Identifiable Assets
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Badger
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$60,000
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$15,000
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$167,000
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Spartan
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$10,000
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$1,500
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$83,000
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Cornhusker
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$23,000
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($2,000)
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$21,000
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Hawkeye
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$9,000
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$1,000
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$19,000
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$102,000
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$15,500
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$290,000
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2. On February 3, 2015, one of K's customers declared bankruptcy. At December 31, 2014, this company owed K $15,000, of which $3,000 was paid in January 2015.
3. On January 18,2015, one of the three major plants of the client burned down.
4. On January 23, 2015, a strike was called at one of K's largest plants, which halted 30% of its production. As of today (February 13), the strike has not been settled.
5. On February 1, 2013, the board of directors adopted a resolution accepting the offer of an investment banker to guarantee the marketing of $1,200,000 of preferred stock.
Instructions:
a. State in each case how the 2014 financial statements would be affected, if at all.
b. Moving ahead to the first quarter of 2015, your team has compiled the following summarized revenue and expense data for the first quarter of the year:
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Sales revenue
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$30,000
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COGS
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$18,000
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Variable Selling Expenses
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$500
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Fixed Selling Expenses
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$1,500
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Included in the fixed selling expenses was the single lump-sum payment of $800 for Internet advertisements for the entire year. Address the following with respect to the first quarter report. (1) Explain whether K should report its operating results for the quarter as if the quarter were a separate reporting period in and of itself, or as if the quarter were an integral part of theannual reporting period. (2) State how the sales revenue, COGS, and fixed selling expense would be reflected in K's quarterly report prepared for the first quarter of 2015.
Show work.
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