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Problem 39_Noventis Corporation prepared the following estimates
| Segment interim reporting | |||||||
| Problem 39 | |||||||
| Noventis Corporation prepared the following estimates for the four quarters of the current year: | |||||||
| First Qt | Second QT | Third qt | Fourth QT | ||||
| Sales | 10,00,000.00 | 12,00,000.00 | 14,00,000.00 | 16,00,000.00 | |||
| COGS | 4,00,000.00 | 4,80,000.00 | 5,50,000.00 | 6,00,000.00 | |||
| Admisnitrative costs | 2,50,000.00 | 1,55,000.00 | 1,60,000.00 | 1,70,000.00 | |||
| Advertising cost | – | 1,00,000.00 | – | – | |||
| executive bonuses | – | – | 80,000.00 | ||||
| Provision for bad debts | – | – | 52,000.00 | ||||
| Annual maintenance costs | 60,000.00 | – | – | ||||
| Aditional information | |||||||
| 1) First quarter admisnitrative costs include 100,000 annual insurance premium | |||||||
| 2) Advertisement costs paid in the second quarter relate to television advertisements | |||||||
| that will be broadcast throughout the entire year. | |||||||
| 3) No special items affect income during the year. | |||||||
| 4) Noventis estimates an effective income tax rate for the year of 40% | |||||||
| a) Assuming that actual results do not vary from the estimates provided, determine | |||||||
| the amount of income to be reported each quarter of the current year. | |||||||
| b) Assume that actual results do not vary from the estimates provided except for that in the third | |||||||
| quarter, the estimated annual effective income tax rate is revised downward to 38%. | |||||||
| Determine the amount of income to be reported each quarter of the current year. |
