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AICPA Exam CPA-Financial Topic 1 Question 99 Discussion
Topic #: 1
An inventory loss from a market price decline occurred in the first quarter, and the decline was not expected to reverse during the fiscal year. However, in the third quarter the inventory's market price recovery exceeded the market decline that occurred in the first quarter. For interim financial reporting, the dollar amount of net inventory should:
Choice 'a' is correct. $91,000 net income for the third quarter ended 9-30-90.
Rules: The entire amount of an 'extraordinary' item should be reported during the period incurred.
A 'cumulative effect' type accounting change is not included in the net income of the period of change; instead, the beginning of the year retained earnings is restated.
Expenses, which benefit more than one interim period, such as property taxes, are allocated among the periods benefited.
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