Question

Taft Corporation operates primarily in the United States. However, a few years ago, it opened a plant in Spain to produce merchandise to sell there. This foreign operation has been so successful that during the past 24 months the company started a manufacturing plant in Italy and another in Greece. Financial information for each of these facilities follows: Spain Italy Greece Sales $ 206,000 $ 630,000 $ 480,000 Intersegment transfers 0 100,600 90,000 Operating expenses 202,000 236,000 220,000 Interest expense 28,000 41,000 31,000 Income taxes 79,000 31,000 46,000 Long-lived assets 121,000 180,000 130,000 The company’s domestic (U.S.) operations reported the following information for the current year: Sales to unaffiliated customers $ 4,620,000 Intersegment transfers 487,000 Operating expenses 2,470,000 Interest expense 166,000 Income taxes 879,000 Long-lived assets 2,260,000 Taft has adopted the following criteria for determining the materiality of an individual foreign country:

Calculate sales to unaffiliated customers within a country and as a percent of the consolidated sales.

Calculate long-lived assets within a country and as a percentage of the long-lived assets.

Apply Taft’s materiality tests to identify the countries which are 10 percent or more of consolidated sales or consolidated long-lived assets to be reported separately.

Answer 1