Question

  

Chinese Corporation is a diversified company that operates in five different industries: Cashew Chicken, Beef & Broccoli, Mongolian Beef, Sweet & Sour Pork, and Sesame Chicken. The following information relating to each segment is available for 2014. Cashew Chicken Beef & Broccoli Mongolian Beef Sweet & Sour Pork Sesame Chicken Sales Revenue $ 40,000 $ 75,000 $ 580,000 $ 35,000 $ 55,000 COGS $ (19,000) $ (50,000) $ (270,000 $ (19,000) $ (30,000) Operating Expenses (10,000) $ (40,000) $ (235,000) $ (12,000) $ (18,000) Total Expenses (29,000) $ (90,000) $ (505,000) $ (31,000) $ (48,000) Operating Profit (Loss) $ 11,000 $ (15,000) $ 75,000 $ 4,000 $ 7,000 S 80,000 $ 500,000 $ 65,000 $ 50,000 Identifiable Assets 35,000 $ Determine which of the segments are reportable.

Answer 1

Answer with working is given below

An Operating Segment should be reported based on meeting any one of the following criteria 1. The revenue for the segment is 10% or more of the combined revenue 2. The absolute value of profit or loss is 10% or more of the greater of a) the combined profit of all operating segments that don't report a loss or b) the combined loss of all operating segments that did report a loss 3. The assets of the segment are 10% or more of the combined Assets Identification of reportable assets using all tests Test 1 Revenue Test Total Revenue Relative % Total Reportable Segment? Cashew Chicken $40,000 5.1% No Beef & Mongolian Sweet & Broccoli Beef Sour Pork $75,000 $580,000 $35,000 9.6% 73.9% 4.5% No Yes No Sesame Chicken Total in abs 10% Threshold $55,000 $785,000 $78,500 7.0% 100.0% No Relative % Total = Segment Revenue /Total Revenue *100% Test 2 Cashew Chicken $11,000 $11,000 Profit test Operating profit (loss) profit segment abs(loss) segment Relative % total Reportable Segment? Beef & Mongolian Sweet & Broccoli Beef Sour Pork -$15,000 $75,000 $4,000 $75,000 $4,000 $15,000 15.5% 77.3% 4.1% Yes Yes No Sesame Chicken Total in abs 10% Threshold $7,000 $82,000 $7,000 $97,000 $9,700 Higher base will be applied $15,000 $1,500 7.2% No 11.3% Yes Relative % Total = Profit or Loss /$97,000 *100% Test 3 Asset test Identifiable asset Relative % Total Reportable Segment ? Cashew Chicken $35,000 4.8% No Beef & Mongolian Sweet & Broccoli Beef Sour Pork $80,000 $500,000 $65,000 11.0% 68.5% 8.9% Yes Yes No Sesame Chicken $50,000 6.8% No Total in abs 10% Threshold $730,000 $73,000 100.0% | Relative % Total = Segment Assets/Total Assets *100% Is Reportable segments do not add up to 75% to Total Revenue than report additional segments Cashew Chicken Beef & Broccoli Mongolian Beef Total Revenue of reportable segment Revenue $40,000 $75,000 $580,000 $695,000 Revenue of Reportable segment Total Revenue $695.000 88.54% $695,000 $785,000 88.54% Therefore only below segments to be reported Cashew Chicken Beef & Broccoli Mongolian Beef