Question

Segment Reporting (Appendix 5.1) Parks Conglomerate Company does business in several different industries. The following is a 2016 condensed income statement for the entire company: Sales $300,000 Less: Cost of goods sold $140,000 30,000 Depreciation expense Other operating expenses 60,000 Total expenses (230,000) Pretax income $70,000 (21,000) Income tax expense Net income $49,000 Earnings per share (20,000 shares) $2.45 Parks has two major operating segments, A and B. No other operating segment contributes 10% or more of the company's activities. Segments A and B make no sales to each other or to the other segments of the company. An analysis reveals that $2,000 of the total depreciation expense and $6,000 of the total other operating expenses are related to general corporate activities. The remaining expenses and total revenues are directly allocable to segment activities according to the following percentages: Percent Identified with Segment A Segment B Other Segments Sales 40 % 46 % 14 % 35 50 15 Cost of goods sold Depreciation expense Other operating expenses 40 45 15 42 40 18

Answer 1

Answer

	Segment A	Segment B	Other segments	Total results
Segment revenues (sales)	$         120,000	$          138,000	$               42,000	$       300,000
Less:
Segment cost of goods sold	$           49,000	$            70,000	$               21,000
Segment depreciation expense	$           11,200	$            12,600	$                 4,200
Segment other operating expenses	$           22,680	$            21,600	$                 9,720
Segment expenses	$           82,880	$          104,200	$               34,920	$       222,000
Segment profit (pretax)	$           37,120	$            33,800	$                 7,080	$         78,000
Less: General corporate expenses (2000+6000)				$            8,000
Pretax income				$         70,000

Calculation

	Segment A	Segment B	Other segments	Total results
Sales	$         300,000	$          300,000	$             300,000
Multiply: Percentage of sales	40%	46%	14%
Segment revenues (sales)	$         120,000	$          138,000	$               42,000	$       300,000
	Segment A	Segment B	Other segments	Total results
Cost of goods sold	$         140,000	$          140,000	$             140,000
Multiply: Percentage of cost of goods sold	35%	50%	15%
Segment cost of goods sold	$           49,000	$            70,000	$               21,000	$       140,000
Depreciation expense (30000-2000)	$           28,000	$            28,000	$               28,000
Multiply: Percentage of depreciation expense	40%	45%	15%
Segment depreciation expense	$           11,200	$            12,600	$                 4,200	$         28,000
Other operating expenses (60000-6000)	$           54,000	$            54,000	$               54,000
Multiply: Percentage of other operating expenses	42%	40%	18%
Segment other operating expenses	$           22,680	$            21,600	$                 9,720	$         54,000