Mason Company has prepared consolidated financial statements for the current yea
ID: 341677 • Letter: M
Question
Mason Company has prepared consolidated financial statements for the current year and is now gathering information in connection with the following five operating segments it has identified.
Determine the reportable segments by performing each applicable test. (Figures are in thousands.)
A. Revenue test:
B. Profit or loss test:
C. Asset test:
CompanyTotal Books Computers Maps Travel Finance Sales to outside parties $ 1,755 $ 196 $ 763 $ 449 $ 347 $ 0 Intersegment sales 575 46 295 61 173 0 Interest income—external 141 82 0 0 0 59 Interest income—intersegment loans 169 0 0 0 0 169 Assets 3,760 261 1,488 303 358 1,350 Operating expenses 1,567 137 873 290 212 55 Expenses—intersegment sales 276 92 73 43 68 0 Interest expense—external 129 0 0 0 0 129 Interest expense—intersegment loans 235 43 93 60 39 0 Income tax expense (savings) 153 67 (19 ) 82 86 (63 ) General corporate expenses 110 Unallocated operating costs 135
Explanation / Answer
Answer:
A. Revenue test:
In the revenue step we will calculate the % of individual Segment revenue. Please find the below calculation
Particular
Revenue
in $
percentage
(%)
Books (196+46+82)
324
12.3%
Reportable
Computer ` (763+295)
1058
40.1%
Repotable
Maps (449+61)
510
19.3%
Repotable
Travel (347+173)
520
19.7%
Repotable
Finance (59+169)
228
8.6%
Total
2640
100.0%
All segment which has more then 10% revenue are reportable segment
__________________________________________________
B. Profit or loss test:
Revenue
in $
Expanses
Profit/Loss
A
B
C=A-B
Books
324
339
-15
Computer `
1058
1020
38
Reportable
Maps
510
475
35
Reportable
Travel
520
405
115
Reportable
Finance
228
121
107
Reportable
Total
2640
2360
280
Here we also considered that segment which generate more than 10% of total profit will be reported
=10% of total profit 280
=10 %x 280
=280
So segment which has $28 or more revenue is reportable
________________________________________________
C. Asset test:
Assets
in $
percentage
(%)
A
B
Books
261
6.9%
Computer `
1,488
39.6%
Reportable
Maps
303
8.1%
Travel
358
9.5%
Finance
1,350
35.9%
Reportable
Total
3760
100.0%
Here we also considered that segment which has more than 10% of total assets will be reported
Particular
Revenue
in $
percentage
(%)
Books (196+46+82)
324
12.3%
Reportable
Computer ` (763+295)
1058
40.1%
Repotable
Maps (449+61)
510
19.3%
Repotable
Travel (347+173)
520
19.7%
Repotable
Finance (59+169)
228
8.6%
Total
2640
100.0%