Apply Interim Reporting Requirements Practice Test

A for-profit software company reports interim results for the quarter ended June 30, 20X5 (Q2). In Q2, it discovered that $120,000 of prepaid insurance recorded at March 31, 20X5 should have been expensed in Q1 because the policy had expired; Q1 interim financial statements were previously issued. The company does not present comparative Q1 statements in its Q2 filing, and it applies the same accounting policies in interim and annual reporting. What adjustment should be made for the interim period?

A for-profit construction company reports interim financial statements for the quarter ended March 31, 20X5 (Q1). On March 20, 20X5, it received notice of an environmental claim related to a project completed in the prior year; as of March 31, management concludes a loss is probable and can be reasonably estimated at $900,000. The company applies the same accounting policies in interim and annual periods. Which disclosure is required for interim reporting?