Choice Multiple Questions
1. SFAS 14 required a U.S. corporation to disclose disaggregated information for
A) industry segments, geographic regions in the United States, and major customers.
B) domestic and foreign operations, imported materials, export sales, and major
customers.
C) industry segments, export sales, and imported materials.
D) manufacturing, marketing, and administrative divisions of the company.
E) industry segments, domestic and foreign operations, export sales, and major
customers.
Answer: E Difficulty: Medium
2. Which tests must a company use to determine which operating segments require separate
disclosure?
A) revenue test and asset test
B) revenue test, profit or loss test, and asset test
C) revenue test and profit or loss test
D) profit or loss test and asset test
E) revenue test, asset test, and liability test
Answer: B Difficulty: Easy
3. Coulanger Corp. identified four operating segments: A, B, C, and D. Segment A met the
revenue test for identifying reportable segments while Segment C met the revenue test,
profit or loss test, and asset test. Segment B and Segment D did not meet any of these
tests. Which of these segments must be disclosed separately?
A.
B.
C.
D.
E.
Segment A
Yes
Yes
Yes
No
No
A)
B)
C)
D)
E)
Segment B
Yes
Yes
No
Yes
No
Entry A
Entry B
Entry C
Entry D
Entry E
Answer: C Difficulty: Easy
Segment C
No
Yes
Yes
No
Yes
Segment D
No
Yes
No
Yes
Yes
4. Kaycee Corporation's revenues for the year ended December 31, 2004, were as follows:
Consolidated Revenue per the Income Statement
Upstream Intersegment Sales
Downstream Intersegment Sales
$1,200,000
$ 180,000
$ 60,000
For purposes of the Revenue Test, what amount will be used as the benchmark for
determining whether a segment is reportable?
A) $
6,000
B) $ 24,000
C) $ 120,000
D) $ 144,000
E) $
-0Answer: D Difficulty: Easy
Use the following to answer questions 5-8:
Natarajan, Inc. had the following operating segments, with the indicated amounts of segment
revenues and segment expenses:
Segment
A
B
C
D
E
External
Revenues
$ 7,500,000
2,900,000
700,000
4,000,000
1,600,000
Intersegment
Sales
$ 600,000
1,000,000
1,300,000
250,000
800,000
Segment
Expenses
$ 6,300,000
4,300,000
2,200,000
4,100,000
2,700,000
5. According to the revenue test, which segments would require disaggregation?
A) A, B, D, and E
B) A and B
C) B and C
D) A, B, and D
E) C, D, and E
Answer: A Difficulty: Easy
6. According to the profit or loss test, which segments would require disaggregation?
A) A, B, D, and E
B) A, B, C, and E
C) A, B, and D
D) A and D
E) A only
Answer: B Difficulty: Medium
7. For purposes of the profit or loss test, segment C's operating profit or loss is
A) $ 1,300,000.
B) $ 700,000.
C) $ 2,000,000.
D) $ 200,000.
E) $ (200,000).
Answer: E Difficulty: Medium
8. When totaling the revenues to use as the basis for the 75% rule, what is the 75% hurdle
that must be exceeded by the revenues of the reportable segments?
A) $ 16,700,000
B) $ 20,650,000
C) $ 1,670,000
D) $ 15,487,500
E) $ 12,525,000
Answer: E Difficulty: Hard
9. When defining a reportable segment, which of the following conditions would be
sufficient to allow a company to combine two operating segments for purposes of testing?
A) The products sold by each segment are produced in the same plant.
B) Both segments have several customers in common.
C) The segments may sell different products, but they have a similar production process.
D) Both segments are required to adhere to U.S. Department of Labor regulations
regarding immigration laws.
E) Both segments are owned by the same parent company.
Answer: C Difficulty: Medium
Use the following to answer questions 10-11:
The Fratilo Co. had three operating segments with the following information:
Sales to
outsiders
Intersegment revenue transfers
Pens
$ 11,200
Pencils
$ 5,600
840
Erasers
$ 8,400
1,400
1,960
In addition, revenues generated at corporate headquarters are $1,400.
10. Combined segment revenues are calculated to be
A) $29,400.
B) $25,200.
C) $26,600.
D) $28,000.
E) $27,300.
Answer: A Difficulty: Medium
11. What is the minimum amount of revenue that each of these segments must earn to be
considered separately reportable?
A) $2,730.
B) $2,660.
C) $2,800.
D) $2,940.
E) $2,520.
Answer: D Difficulty: Medium
12. The Rivers Co. had four separate operating segments:
Sales to outsiders
Intersegment revenue
transfers
Blueberries
$ 172,200
Cherries
$ 113,400
43,400
Gooseberries
Grapes
$ 133,000 $ 107,800
36,400
18,200
25,200
What amount of revenues must be generated from one customer before that party must be
identified as a major customer?
A) $57,680
B) $64,960
C) $52,640
D) $78,960
E) $63,560
Answer: C Difficulty: Medium
13. Which one of the following items must be disclosed in the footnotes for all reportable
operating segments?
I.Revenue from external customers.
I.Total Segment Assets
I.Revenues from foreign customers, identified by country.
A)
B)
C)
D)
E)
I, II, and III
I and III only
II and III only
I and II only
None of the above items have to be disclosed.
Answer: D Difficulty: Easy
14. Kurves Corp. had six different operating segments reporting the following operating
profit and loss figures:
Segment
A
B
C
D
E
F
Profit or
(Loss)
$
112,000
(196,000)
1,316,000
(616,000)
(126,000)
(140,000)
Which one of the following statements is true?
A) Segment A is a reportable segment based on this test.
B) Segment B is not a reportable segment based on this test.
C) Segment E is a reportable segment based on this test.
D) Segment C is not a reportable segment based on this test.
E) Segment D is a reportable segment based on this test.
Answer: E Difficulty: Medium
Use the following to answer questions 15-17:
Retro Corp. was engaged solely in manufacturing operations. The following data pertain to the
operating segments for 2004:
Operating
Segment
A
B
C
D
E
F
Total
Revenue
$ 14,000,000
11,200,000
8,400,000
4,200,000
5,950,000
2,100,000
$ 45,850,000
Profit
$ 2,450,000
1,960,000
1,680,000
770,000
945,000
315,000
$ 8,120,000
Assets at
12/31/04
$ 28,000,000
24,500,000
17,500,000
10,500,000
9,800,000
4,200,000
$ 94,500,000
15. What is the minimum amount of revenue that each of these segments must earn to be
considered separately reportable?
A) $4,343,684
B) $4,826,316
C) $5,067,632
D) $4,585,000
E) $4,705,658
Answer: D Difficulty: Easy
16. What is the minimum amount of profit or loss that each of these segments must earn to be
considered separately reportable?
A) $769,263
B) $812,000
C) $854,737
D) $897,000
E) $833,368
Answer: B Difficulty: Easy
17. What is the minimum amount of assets that each of these segments must own to be
considered separately reportable?
A) $ 9,450,000
B) $ 8,624,272
C) $10,643,000
D) $12,936,408
E) $10,413,000
Answer: A Difficulty: Easy
18. Which of the following statements regarding the determination of operating segments
under SFAS 131 is false?
A) An operating segment is a component of an enterprise that engages in business
activities from which it earns revenues and incurs expenses.
B) The operating results of an operating segment are reviewed regularly by the chief
operating decision maker to assess performance.
C) There is discrete financial information available for each operating segment
D) An organizational unit cannot be an operating segment if all of its revenues or
expenses result from transactions with other segments.
E) None of the above.
Answer: D Difficulty: Medium
19. A company that generates reports by both geographic region and product line must
consider additional criteria in identifying operating segments. Which of the following
statement(s) is correct?
I.An operating segment has a segment manager who is directly accountable to the chief
operating decision maker for its financial performance.
I.If more than one set of organizational units exists, but there is only one set for which
segment managers are held responsible, each organizational unit is considered an
operating segment.
I.If segment managers exist for two or more overlapping sets of organizational units, the
nature of the business activities must be considered.
A)
B)
C)
D)
E)
I, II, and II
I and III only
I and II only
II and III only
None of the above.
Answer: B Difficulty: Medium
20. Which of the following is not one of the criteria management should consider in
determining whether business activities and environments of an operating segment are
similar?
A) The geographical location of the operations.
B) The nature of the production process.
C) The distribution methods.
D) The nature of the regulatory environment, if applicable.
E) The type or class of customer.
Answer: A Difficulty: Easy
21. The hardware operating segment of Bloom Corporation has the following revenues for
the year ended December 31, 2004:
Sales to outsiders
Intersegment transfers
Interest revenue outsiders
Interest revenue intersegment loans
$ 417,000
23,000
7,000
33,000
For purposes of the Revenue Test, what amount will be used as total revenues of the
hardware operating segment?
A) $ 417,000
B) $ 440,000
C) $ 424,000
D) $ 460,000
E) $ 480,000
Answer: E Difficulty: Easy
22. Which of the following statements is false concerning the number of operating segments
that should be disclosed?
A) At least 75 percent of total company sales made to outsiders should be presented.
B) Even though an operating segment has been reportable in the past and is of
continuing significance, it must meet at least one of the three reporting tests to report
separately in the current year.
C) If the 75 percent rule is not met by the results of applying all three reporting tests,
additional segments must be disclosed separately despite their failure to satisfy even
one of the three quantitative thresholds.
D) If an operating segment qualifies for disclosure in the current year, prior period
segment data presented for comparative purposes must be restated to reflect the
newly reportable segment as a separate segment.
E) The practical limit to the number of operating segments is 10.
Answer: B Difficulty: Easy
23. Whitley Corporation identified four operating segments: Automotive, Electrical, Lawn
Equipment, and Sporting Goods. Automotive met the revenue test and the profit or loss
test. Electrical met all three tests. Lawn Equipment met only the asset test. Sporting
Goods did not meet any of the three tests. Which of these segments must be disclosed
separately?
A)
B)
C)
D)
E)
Automotive
Yes
No
Yes
Yes
No
Electrical
Yes
Yes
Yes
Yes
No
Lawn Equipment
Yes
No
Yes
No
No
Sporting Goods
Yes
No
No
No
Yes
Answer: C Difficulty: Easy
24. Which one of the following items is not required to be disclosed for each operating
segment?
A) Factors used to identify operating segments.
B) Products and services from which each segment derives its revenues.
C) Revenues from external customers.
D) Factors used to allocate company-wide expenses.
E) Revenues from transactions with other operating segments.
Answer: D Difficulty: Medium
25. The following items are required to be disclosed for each operating segment except:
A) Factors used to allocate company-wide pension expense.
B) Revenues from transactions with other operating segments.
C) Interest revenue and interest expense.
D) Depreciation, depletion, and amortization expense.
E) Revenues from external customers.
Answer: A Difficulty: Easy
Use the following to answer questions 26-32:
Dean Hardware, Inc. is comprised of five operating segments. Information about each of these
segments is as follows (in thousands):
Rakes
Sales to outsiders
$ 94
Intersegment transfers
4
Interest revenue outsiders
2
Interest revenue intersegment
Operating expenses outsiders
116
Operating expenses intersegment
2
Interest expense
Income taxes
(4)
Tangible assets
18
Intangible assets
Intersegment loans
8
Pails
$506
26
6
414
20
12
10
116
6
Shovels
$44
14
4
40
6
4
12
4
-
Hardware
$122
30
8
102
16
2
6
12
8
-
26. What is the total amount of revenues in applying the revenue test?
A) $ 794
B) $ 808
C) $ 906
D) $ 916
E) $ 934
Answer: E Difficulty: Medium
27. Which operating segments are reportable under the revenue test?
A) Pails and Hardware.
B) Rakes, Pails, and Hardware.
C) Rakes, Hardware, and Accessories.
D) Rakes and Pails.
E) Rakes and Hardware.
Answer: B Difficulty: Medium
Accessories
$28
24
22
26
22
22
2
8
6
-
28. In applying the profit and loss test, what is the minimum amount an operating segment
must have in order to meet the profit and loss test for a reportable segment?
A) $ 9.0
B) $ 11.6
C) $ 13.0
D) $ 46.7
E) $ 67.8
Answer: C Difficulty: Medium
29. Which operating segments are reportable under the profit or loss test?
A) Rakes, Pails, and Shovels.
B) Rakes, Pails, Shovels, and Hardware.
C) Rakes, Pails, and Hardware.
D) Rakes, Pails, Shovels, Hardware, and Accessories.
E) Rakes and Accessories.
Answer: C Difficulty: Medium
30. Which operating segments are reportable under the asset test?
A) None
B) Pails.
C) Rakes, Pails, and Shovels.
D) Rakes, Shovels, and Hardware.
E) Rakes, Pails, and Hardware.
Answer: E Difficulty: Medium
31. In applying the asset test, what is the minimum amount an operating segment must
have in order to meet the asset test for a reportable segment?
A) $ 12.5
B) $ 15.2
C) $ 17.2
D) $ 18.4
E) $ 19.8
Answer: E Difficulty: Medium
32. Which operating segments are reportable in applying the asset test?
A) Rakes and Pails.
B) Rakes, Pails, and Hardware.
C) Rakes, Pails, Shovels, and Hardware.
D) Rakes, Pails, Shovels, Hardware, and Accessories.
E) None.
Answer: B Difficulty: Medium
33. How should revenues be recognized in interim periods?
A) In the same way as they are recognized on an annual basis.
B) On the cash basis.
C) On an annualized basis.
D) On a seasonal basis.
E) There are no revenues recognized in interim periods.
Answer: A Difficulty: Easy
34. Which of the following is not a modification to inventory procedures reported in an
interim financial statement?
A) LIFO liquidations expected to reverse by the end of the year are ignored.
B) Lower-of-cost-or-market adjustments expected to reverse by the end of the year are
ignored.
C) Variances in a standard costing system are reported at the end of the interim period
unless they are expected to be absorbed by year-end.
D) FIFO is not acceptable in an interim financial statement.
E) All of the above are modifications in an interim financial statement.
Answer: D Difficulty: Medium
Use the following to answer 35-36:
Cement questions Company, Inc. began the first quarter with 1,000 units of inventory costing $25 per unit.
During the first quarter, 3,000 units were purchased at a cost of $40 per unit, and sales of 3,400
units at $65 per unit were made. During the second quarter, the company expects to replace the
units of beginning inventory sold at a cost of $45 per unit.
35. What is the correct journal entry to record cost of goods sold at the end of the first
quarter?
A) Inventory
8,000
Cost of Goods Sold
8,000
B) Inventory
8,000
Excess of replacement cost over historical cost of LIFO
liquidation
8,000
C) Cost of goods sold
138,000
Inventory
130,000
Excess of replacement cost over historical cost of LIFO
liquidation
8,000
D) Cost of goods sold
130,000
Excess of replacement cost over historical cost of LIFO
liquidation
8,000
Inventory
138,000
E) No journal entry is required.
Answer: C Difficulty: Medium
36. The amount of gross profit for the first quarter is:
A) $ 83,000
B) $ 87,000
C) $ 90,000
D) $221,000
E) $250,000
Answer: A Difficulty: Hard
37. Betsy Kirkland, Inc. incurred a flood loss during the first quarter of 2004 that is deemed
both unusual and infrequent. The loss is considered immaterial to the twelve-month
period, but is material in amount relative to the first quarter. The proper accounting
treatment in the first quarterly interim statement is to:
A) Ignore the loss.
B) Record the loss in the first quarter as an extraordinary loss, net of income taxes.
C) Record one-fourth of the loss in the first quarter as an extraordinary loss, net of
income taxes.
D) Ignore the loss in the first quarter, and record it in the annual statement only.
E) Record the loss in the first quarter, not as an extraordinary loss, and disclose the loss
in a separate note or on the income statement.
Answer: E Difficulty: Medium
38. How should a change from one generally accepted accounting principle to another
accepted principle be handled in a third-quarter income statement?
A) Retroactively restate the first-quarter income statement, net of income taxes, as
though the change occurred at the beginning of the year.
B) Postpone recording of the change to the annual income statement.
C) Record the change in the third-quarter income statement, net of income taxes.
D) Record the change in the third-quarter income statement, without reduction for
income taxes.
E) These changes are prohibited by GAAP.
Answer: A Difficulty: Medium
39. Which of the following is not a required disclosure in an interim financial report?
A) Sales or gross revenues
B) Provision for income taxes
C) Extraordinary items
D) Gains on sales of major equipment
E) Earnings per share
Answer: D Difficulty: Medium
40. Which of the following is not a required disclosure in an interim financial report?
A) Net income
B) Earnings per share
C) Gross profit
D) Significant changes in estimates or provisions for income taxes
E) Disposal of a segment, net of income taxes.
Answer: C Difficulty: Medium
41. Which of the following items of information are required to be included in interim reports
for each operating segment?
I.Revenues from external customers
I.Segment profit or loss
I.Reconciliation of segment profit or loss to the enterprise's total income before taxes
A)
B)
C)
D)
E)
I and III only.
I and II only.
I, II and III.
II and III only.
None of the above.
Answer: C Difficulty: Medium
Matching Question
42. For each of the following situations, select the best answer concerning segment
disclosures of reportable segments.
A.
A.
A.
A.
Required to be disclosed by an operating segment, but not a geographical segment.
Required to be disclosed by a geographical segment, but not an operating segment.
Required to be disclosed by both an operating segment and a geographical segment.
Not required to be disclosed by either an operating segment or a geographical
segment.
___ 1.
___ 2.
___ 3.
___ 4.
___ 5.
___ 6.
___ 7.
___ 8.
___ 9.
___ 10.
Factors used to identify segments.
Revenues from external customers.
Types of products and services from which each segment derives its
revenues.
Names of major customers.
Revenues from transactions with other segments.
Interest revenue.
Long-lived assets.
Discontinued operations and extraordinary items, when applicable.
Income tax expense or benefit.
Revenues for the domestic country.
Ans: 1-A; 2-C; 3-A; 4-D; 5-A; 6-A; 7-C; 8-A; 9-A; 10-B
Brief Essay Questions
43. Why would some corporations prefer not to disclose segment information?
Answer: Some companies would prefer not to disclose segment information because of
the cost of preparing the information and because their managers fear that the information
they disclose may be useful to their competitors. Difficulty: Easy
44. What term, per SFAS 14, is used for an industry segment that makes up more than ninety
percent of a company's revenues, operating profit or loss, and identifiable assets?
Answer: The appropriate term is dominant industry segment.
Difficulty: Easy
45. Crookman Co. had several operating segments, including Segment O. Segment O had
never met the requirements to be separately reported. During 2004, Segment O's revenue
and operating profit were higher than the ten percent threshold due to a labor strike
against its primary competitor. The strike ended early in 2005. How should Crookman
Co. have reported Segment O for 2004?
Answer: Segment O should not be separately disclosed because it only met requirements
for disaggregation temporarily. Difficulty: Medium
46. What approach for segment determination was adopted by SFAS 131?
Answer: The management approach for segment determination was adopted by SFAS
131. Difficulty: Medium
47. What general information about an operating segment needs to be disclosed per SFAS
131?
Answer: The general information about an operating segment that needs to be disclosed
per SFAS 131 includes:
1.Factors used to identify operating segments.
1.Types of products and services from which each operating segment derives its
revenues.
Difficulty: Easy
48. According to SFAS 131, how should common costs be allocated to individual segments to
determine segment profit or loss?
Answer: SFAS 131 does not require common costs be allocated to individual segments to
determine segment profit or loss if this is not done for internal purposes. Any allocations
that are made must be done on a reasonable basis. Difficulty: Easy
49. List the five aggregation criteria that need to be considered by management in
determining whether business activities and environments are similar.
Answer: The five aggregation criteria are:
1.The nature of the products and services provided by each operating segment.
1.The nature of the production process.
1.The type or class of customer.
1.The distribution methods.
1.If applicable, the nature of the regulatory environment.
Difficulty: Medium
50. What is the purpose of the FASB's seventy-five percent requirement for industry
segments?
Answer: A substantial portion of the company's operations should be presented in
disaggregated form. The seventy-five percent requirement is the FASB's guideline in
making sure companies report information about enough segments.
Difficulty: Medium
51. What revenues and expenses included in segment profit or loss need to be disclosed per
SFAS 131?
Answer: The revenues and expenses included in segment profit or loss that need to be
disclosed per SFAS 131 include:
1.Revenues from external customers.
1.Revenues from transactions with other operating segments.
1.Interest revenue and interest expense (reported separately); net interest revenue may be
reported for finance segments if this measure is used internally for evaluation.
1.Depreciation, depletion, and amortization expense.
1.Other significant noncash items included in segment profit or loss.
1.Unusual items (discontinued operations and extraordinary items).
1.Income tax expense or benefit.
Difficulty: Medium
52. What related items in regard to total segment assets need to be disclosed per SFAS 131?
Answer: The related items in regard to total segment assets that need to be disclosed per
SFAS 131 include:
1.Investment in equity method affiliates.
1.Expenditures for additions to long-lived assets.
Difficulty: Medium
53. Which items of information are required to be included in interim reports for each
operating segment?
Answer: The items of information that are required to be included in interim reports for
each operating segment are:
1.Revenues from external customers.
1.Intersegment revenues.
1.Segment profit or loss.
1.Total assets, if there has been a material change from the last annual report.
Difficulty: Medium
54. Which two items of information must be reported for (1) the domestic country, (2) all
foreign countries in which the enterprise derives revenues or holds assets, and (3) each
foreign country in which a material amount of revenues is derived or assets are held?
Answer: The two items of information are:
1. Revenues from external customers.
1. Long-lived assets.
Difficulty: Medium
Problems
55. Burnside Corp. is organized into four operating segments. The following segment
information was generated by the internal reporting system in 2004:
Cards
Calendars
Clothing
Books
Revenues from
Outsiders
$ 1,680,000
1,260,000
1,400,000
1,120,000
Intersegment
Revenues
$ 140,000
280,000
70,000
Operating
Expenses
$ 1,260,000
1,890,000
980,000
1,078,000
Additional operating expenses (of a general nature) incurred by the company amounted to
$980,000.
Required:
What was the profit or loss of each of these segments? Carry out the profit or loss test to
determine which of these segments was separately reportable.
Difficulty: Medium
Answer:
Profit or Loss Test
Revenues
from
Intersegment
Operating
Outsiders
Revenues
Expenses
Profit
Loss
Cards
$ 1,680,000 $
140,000 $ (1,260,000) $ 560,000
Calendars
1,260,000
280,000
(1,890,000)
$ 350,000
Clothing
1,400,000
( 980,000)
420,000
Books
1,120,000
70,000
(1,078,000)
112,000
Totals
$ 1,092,000 $ 350,000
Any segment with an absolute amount of profit or loss greater than or equal to
$109,200 ($1,092,000 x 10%) is separately reportable. Based on this test, each of
the four segments must be reported separately.
Use the following to answer questions 56-58:
Faru Co. identified five industry segments: (1) plastics, (2) metals, (3) lumber, (4) paper, and (5)
finance. Each of these segments had been consolidated appropriately by the company in
producing its annual financial statements. Information describing each segment is presented
below (in thousands).
Sales to outside parties
Intersegment revenues transfers
Interest income from outside parties
Interest income from intersegment
loans
Operating expenses
Interest expense
Tangible assets
Intangible assets
Intersegment loans
Plastics
$ 8,215
138
0
Metals
$ 2,787
170
25
0
5,088
79
1,678
94
0
0
2,096
21
3,882
469
0
Lumber
Paper
$
827 $ 451
125
140
8
0
0
1,191
66
408
0
0
Finance
$
0
0
242
0
753
40
729
62
0
207
21
113
135
863
0
In addition, Faru Co. had $1,625,000 in common expenses that are not allocated to the various
segments.
56. Required:
Carry out the revenue test to determine which of these segments was separately
reportable.
Difficulty: Medium
Answer:
Revenue Test (numbers in thousands)
Segment
Plastics
Metals
Lumber
Paper
Finance
Total
Revenues
$
8,353
2,982
960
591
242
$ 13,128
Percentage
63.63% reportable
22.72% reportable
7.31%
4.50%
1.84%
57. Required:
Carry out the profit or loss test to determine which of these segments was separately
reportable.
Difficulty: Medium
Answer:
Profit or Loss Test (numbers in thousands)
Segment
Plastics
Metals
Lumber
Paper
Finance
Total
Revenues
Expenses
$
8,353 $ ( 5,167)
2,982
( 2,117)
960
( 1,257)
591
( 793)
242
( 134)
$ 13,128 $ ( 9,468)
Profit
$ 3,186
865
Loss
reportable
reportable
$
108
$ 4,159
297
202
$
499
58. Required:
Carry out the asset test to determine which of these segments was separately reportable.
Difficulty: Medium
Answer:
Asset Test (numbers in thousands)
Segment
Plastics
Metals
Lumber
Paper
Finance
Total
Assets
$
1,772
4,351
408
791
998
$
8,320
Percentage
21.30% reportable
52.30% reportable
4.90%
9.50%
12.00% reportable
59. Blanton Corporation is comprised of five operating segments. Information about each of
these segments is as follows (in thousands):
Sales to outsiders
Intersegment transfers
Interest revenue outsiders
Interest revenue intersegment
Operating expenses outsiders
Operating expenses
intersegment
Interest expense
Income taxes
Tangible assets
Intangible assets
Intersegment loans
Linens
$ 47
2
1
58
Kitchen
$253
13
3
207
1
(2)
9
4
10
6
5
58
Grocery
$22
7
2
20
Furniture
$61
15
4
51
3
8
1
3
6
4
2
9
2
3
-
-
Stationery
$14
12
11
13
11
12
4
-
Required:
a. Which operating segments are reportable under the revenue test?
b. What is the total amount of revenues in applying the revenues test?
c. Which operating segments are reportable under the profit or loss test?
d. In applying the profit and loss test, what is the minimum amount an operating
segment must have in order to meet the profit and loss test for a reportable segment?
e. Which operating segments are reportable under the asset test?
f. In applying the asset test, what is the minimum amount an operating segment must
have in order to meet the asset test for a reportable segment?
g. Which operating segments are reportable?
Difficulty: Hard
Answer:
a.
Revenue Test (numbers in thousands):
Segment Revenue Percenta
s
ge
Linens
$ 50
10.71% reportable
Kitchen
269
57.60% reportable
Grocery
31
6.64%
Furniture
80
17.13% reportable
Stationer
37
7.92%
y
Total
$467 100.00%
b.
Revenue Test (numbers in thousands):
Segment Revenues
Linens
Kitchen
Grocery
Furniture
Stationer
y
Total
c.
e.
$467
Profit or Loss Test (numbers in thousands):
Segment Revenue Expenses Profits
s
Linens
$ 50
$ 57
Kitchen
d.
$ 50
269
31
80
37
269
Grocery
31
Furniture
80
Stationer
37
y
Total
$467
Benchmark: $65 x 10% = $6.5
Losses
228
$41
25
63
36
6
17
1
$409
$65
Asset Test (numbers in thousands):
Segment Revenue Percenta
s
ge
Linens
$13
13.13%
Kitchen
61
61.62%
Grocery
11
11.11%
Furniture
10
10.10%
Stationer
4
4.04%
y
reportable
reportable
reportable
reportable
$7 reportabl
e
- reportabl
e
- reportabl
e
$7
f.
g.
Total
$99 100.00%
Benchmark: $99 x 10% = $9.9
Linens (all three tests), Kitchen (all three tests), Grocery (asset test) and
Furniture (all three tests).