The following information pertains to Aria Corp. and its divisions for the year ended December 31, 1988:

Aria and all of its divisions are engaged solely in manufacturing operations. Aria has a reportable segment
if that segment's revenue exceeds:

• A. $200,000
• B. $264,000
• C. $260,000
• D. $204,000

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What is the purpose of information presented in notes to the financial statements?

• A. To provide disclosures required by generally accepted accounting principles.
• B. To correct improper presentation in the financial statements.
• C. To present management's responses to auditor comments.
• D. To provide recognition of amounts not included in the totals of the financial statements.

Is the cumulative effect of an inventory pricing change on prior years earnings reported on the financial
statements for

• A. Option C
• B. Option D
• C. Option A
• D. Option B

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Which of the following should be disclosed for each reportable operating segment of an enterprise?

• A. Option C
• B. Option D
• C. Option A
• D. Option B

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On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with
Quo's president and outside accountants, made changes in accounting policies, corrected several errors
dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment
required for these transactions. These treatments are:
. Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the
accounting change or error correction in the 1993 financial statements, and do not restate the 1992
financial statements.
. Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust
1 992 beginning retained earnings if the error or change affects a period prior to 1992.
. Prospective approach - Report 1993 and future financial statements on the new basis but do not restate
1 992 financial statements.
Item to Be Answered
Quo manufactures heavy equipment to customer specifications on a contract basis. On the basis that it is
preferable, accounting for these long-term contracts was switched from the completed-contract method to
the percentage-of-completion method.
List B (Select one)

• A. Prospective approach.
• B. Retroactive or retrospective restatement approach.
• C. Cumulative effect approach.

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