Evaluating Interim Net Income Despite the fact that Pipper Company was able to reduce the per-unit cost of producing and selling its products, the company’s second quarter net income was substantially below the amount reported for the first quarter. Briefly discuss how each of the following would impact your evaluation of operating results for the second quarter:

a. Industry sales data show that over the last 10 years there has been an average annual increase in sales of 10 percent.

Pipper’s sales in the first quarter increased by nearly 20 percent over the prior year.

b. The company sold its dental floss division during the second quarter and recorded a loss on the sale.

c. Management of Pipper failed to record depreciation expense on fixed assets during the first quarter and expensed the proper amount for the first half of the year in the second quarter.

d. Unearned sales revenue increased substantially near the end of the second quarter. Pipper will recognize sales revenue as the products are delivered in the third quarter.

e. Pipper’s sales are seasonal and it normally has 40 percent of its total annual sales in the second quarter.