Question

Exercise 24-03 Flounder Company is involved in four separate industries. The following information is available for each of the four industries. Operating 3X>N Total Revenue $62,176 10,710 26,800 7,514 $107,200 Operating Profit (Loss) $15,130 2,400 (3,020) 1,090 $15,600 $15,600 Identifiable Assets $178,176 89,088 21,504 18,432 $307,200 Determine which of the operating segments are reportable based on the: Reportable Segments (a) Revenue test. (b) (c) Operating profit (loss) test. Identifiable assets test.

Answer 1

a)

In case of Revenue test, a segment will be called a reportable segment when its revenues are more than the 10% of the total revenues. In this case, total revenues are $107,200 and 10% of total revenues are $10,720 ($107,200*10/100) or more will be considered as Reportable Segments.

Therefore, Segments W & Y are treated as Reportable segments based on the revenue test.

b)

In case of Operating Profit (Loss), a segment will be called a reportable segment when its operating profit or operating loss is more than 10% of the total operating profit or loss. In this case, total operating profit is $15,600 and 10% of total operating profit is $1,560 ($15,600*10/100), segments have profit or loss of $1,560 or more will be considered as Reportable Segments.

Therefore, Segments W, X & Y are treated as Reportable segments based on operating profit or loss test.

c)

In case of Identifiable Assets, s segment will be called a reportable segment when its identifiable assets are more than 10% of the total identifiable assets. In this case, total identifiable assets are $307,200 and 10% of total identifiable assets are $30,720 ($307,200*10/100), segments have identifiable assets worth of $30,720 or more will be treated as Reportable Segments.

Therefore, Segments W & X are treated as Reportable segments based on the identifiable assets test.