Please help with the following discussion question. Thank you so much.... Case C
ID: 2424492 • Letter: P
Question
Please help with the following discussion question. Thank you so much....
Case C13-3: Segment Disclosures in the Financial Statements [CMA Adapted]
Bennett Inc. is a publicly held corporation whose diversified operations have been separated into five industry segments. Bennett is in the process of preparing its annual financial statements for the year ended December 31, 20X5. The following information has been collected for the preparation of the segment reports required by FASB 131 (ASC 280).
BENNETT INC.
Selected Data
For the Year Ended December 31, 20X5
(in thousands)
Item Power Tools Fastening Systems Household Products Plumbing Products Security Systems
Sales to Unaffiliated Customers $32,000 $4,500 $4,800 $3,000 $2,000
Intersegment Sales 10,000 5,500 200 1,000 --------------
Total Revenue 42,000 10,000 5,000 4,000 2,000
Cost of Goods Sold 30,000 8,000 4,500 3,100 1,700
Operating Profit 4,500 1,000 (600) 700 (100)
Net Income 2,600 800 (750) (100) (200)
Segment Assets 50,000 23,000 17,000 6,000 4,000
Required
a. Determine which of the operating segments are reportable segments for Bennett. Your determination should include all required tests and the results of those tests for each of Bennett’s five segments.
b. The reportable segments determined in (a) must represent a substantial portion of Bennett’s total operations when taken together. Describe how to determine whether a substantial portion of Bennett’s operations are explained by its segment information.
Explanation / Answer
1) the three reqiured test are :(It should qualify one or more of the tests to qualify)
a) total revenue of each segment should be 10 % or more of the total revenue of the segments together
= Each operating segement total revenue/ combined revenue of all operating segments.
b) Profit(loss) test should be 10% or more
= Each opearing segments profit(loss)/ Absolute value of the combined profit or loss (whichever is greater)
c) Asset total test should be 10% or more
= Each operating segment's assets/ combined assets of all industry segments
Bennett inc.
b)For the reportable segments- for determining this we must see that the revenue in total from the sales of unaffilitated customers of all the segments should be 75% at least of company's total sales as a whole
Benetts reoprtable segmensts sales to unaffiliated customers is $44,300 in total and is about 96% of the company's total sales ($44,300/ 46,300) , thus the criteria is met
Power tools Fastening system hosehold plumber security total total revenue 42,000 10,000 5,000 4,000 2,000 63,000 % 67 16 8 6 3 Profit 4,500 1,000 (600) 700 (100) 6,200 % 73% 16% 10% 11% 2% Assets 50,000 23,000 17,000 6,000 4,000 100,000 % 50% 23% 17% 6% 4% Reportable yes yes yes yes yes No