Questions Flashcards
- Correy Corp. and its divisions (each is an operating segment) are engaged solely in manufacturing operations. The following data (consistent with prior years’ data) pertain to the operations conducted for the year ended December 31, 20X3:
(Industry operating segmentsA-F):
Total Rev / Oper. Profit / Identifiable Assets @12/31/X3
A: $10,000,000 / $1,750,000 / $20,000,000
B: 8,000,000 / 1,400,00017,500,000
C: 6,000,000 / 1,200,000 / 12,500,000
D: 3,000,000 / 550,000 7,500,000
E: 4,250,000 / 675,000 / 7,000,000
F: 1,500,000 / 225,000 / 3,000,000
==>$32,750,000 / $5,800,000 / $67,500,000
In its segment information for 20X3, how many reportable segments does Correy have?
a. Three.
b. Four.
c. Five.
d. Six.
- (c) A segment is reportable if it represents at least 10% of the activities of the overall entity.
The 10% test is applied to revenues, assets, and profits and if the segment’s amount is at least 10% of the total for any one of those factors, it is a reportable segment.
Segments A, B, C, and E are reportable segments under all 3 tests.
Segment D is a reportable segment because its identifiable assets are 11.1% of the total, exceeding the 10% minimum.
As a result, all 5 are reportable segments.
- ABC Co. had the following revenues and expenses that occurred relating to their operating segments during the year:
Sales to unaffiliated customers = $1,000,000
Intersegment sales of products = 400,000
Interest earned on loans to other segments = 30,000
General corporate expenses = 25,000
In order to qualify as a reportable segment, the segments revenue must exceed..
a $143,000
b. $140,000
c. $140,500
d. $100,000
- (b)When applying the revenue test to determine if a segment is a reportable segment, the segment’s revenues are compared to the total for the entity.
Total revenues include revenues from intersegment sales.
Revenues do not, however, include interest earned, which is reported as other income, not revenue.
It also doesn’t include general corporate expenses, as those stay at the corporate level.
As a result, total revenue is ($1,000,000 + $400,000) $1,400,000 and any segment with 10% revenues of $140,000 or above will be a reportable segment.
- There is a method in segment reporting to help define what constitutes a “segment”. The method that is used under ASC 280 is called…
a. Segment approach.
b. Revenue approach.
c. Profit or Loss approach.
d. Management
3.(d)The method for determining what segments are part of an entity is referred to as the management approach.
This is because segments are identified as those activities involving revenues and expenses that are evaluated by management.
As a result, management may decide to identify segments by type of activity, such as manufacturing and sales; product, such as clothing and accessories; geographical location; or some other criteria.
- Rocket Corporation prepares its financial statements in accordance with IFRS.
For segment reporting purposes, which tests must Rocket apply to determine if a unit or component is an operating segment?
a. Revenue test and asset test.
b. Revenue test, asset test, and profit or loss test.
c. Revenue test, asset test, and expense test.
d. Revenue test, asset test, and cash flow test
4.(b) Similarly to US GAAP, entities use three tests under IFRS for segment reporting purposes, a revenue test, a total asset test and a profit or loss test to identify reportable segments
