Question

Vehicle Corporation is organized into four operating segments. The internal reporting system generated the following segment information: Autos Trucks Revenues from Outsiders $ 4,000,000 3,500,000 2,600,000 900.000 Intersement Transfers $ 100,000 200.000 $ SUS Operating Expenses 3,600,000 4,000,000 2,000,000 1,020,000 Motorcycles 50.000 The company incurred additional operating expenses (of a general nature) of $1.200.000 a. What is the profit or loss of each of these segments? b. Perform the profit or loss test to determine which of these segments is separately reportable. ® Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B What is the profit or loss of each of these segments? Profit Loss Autos Trucks SUVs Motorcycles Total Red Required B >

Answer 1

a) Calculation of profit or loss for each segments (Amounts in $)

	Revenues from Outsiders (i)	Intersegment Transfers (ii)	Operating Expenses (iii)	Profit (i+ii-iii)	Loss (iii-i-ii)
Autos	4,000,000	100,000	3,600,000	500,000
Trucks	3,500,000	200,000	4,000,000		300,000
SUVs	2,600,000	0	2,000,000	600,000
Motorcycles	900,000	50,000	1,020,000		70,000
Total				1,100,000	370,000

b) Reportable segments as per profit or loss method are those whose profit or loss is 10% or more of total profit or total loss whichever is higher. In this case total profit is higher (i.e. $1,100,000).

Desired Profit or loss = $1,100,000*10% = $110,000

As segment Auto, Truck and SUV's profit or loss is higher than $110,000, these three segments are separately reportable.