Required:
Listed below are six independent cases on how accounting facts might be reported on an individual company’s interim financial reports. For each case, state whether the method proposed to be used for interim reporting would be acceptable under generally accepted accounting principles applicable to interim financial data. Support each answer with a brief explanation.
A. Reed Company wrote inventory down to reflect lower of cost or market in the first quarter of 2005. At year-end the market value exceeds the original acquisition cost of this inventory. Consequently, management plans to write the inventory back up to its original cost as a year-end adjustment.
B. Greenfield Company realized a large gain on the sale of investments at the beginning of the second quarter. The company wants to report one-third of the gain in each of the remaining quarters.
C. Dole Company has estimated its annual audit fee. They plan to prorate this expense equally over all four quarters.
D. Fur Company was reasonably certain they would have an employee strike in the third quarter. As a result, they shipped heavily during the second quarter but plan to defer the recognition of the sales in excess of the normal sales volume. The deferred sales will be recognized as sales in the third quarter when the strike is in progress. Fur Company management thinks this is more nearly representative of normal second- and third-quarter operations.
E. Rexx Company takes a physical inventory at year-end for annual financial statement purposes. Inventory and cost of sales reported in the interim quarterly statements are based on estimated gross profit rates, because a physical inventory would result in a cessation of operations. Rexx Company does have reliable perpetual inventory records.
F. Shelley Company is planning to report one-fourth of its pension expense in each quarter.

Instructions
Compute the depreciation expense under the following methods for the year indicated.
(a) Straight-line for 2017.
(b) Units-of-activity for 2017, assuming machine usage was 1,700 hours.
(c) Declining-balance using double the straight-line rate for 2017 and 2018.

Required:
Prepare a report to Winona’s CFO analyzing Molanosa’s sale to the new customer. Your report should include an evaluation of the appropriateness of Molanosa’s accounting for the sale and an assessment of why it might have entered into this transaction and why it might have accounted for it this way.