Question

Vehicle Corporation is organized into four operating segments. The internal reporting system generated the following segment information:

	Revenues from Outsiders				Intersegment Transfers				Operating Expenses
Autos	$	4,015,000			$	115,000			$	3,615,000
Trucks		3,515,000				215,000				4,015,000
SUVs		2,615,000				0				2,015,000
Motorcycles		915,000				65,000				1,035,000

The company incurred additional operating expenses (of a general nature) of $1,215,000.

1. What is the profit or loss of each of these segments?

2. Perform the profit or loss test to determine which of these segments is separately reportable.

Answer 1

Ans:

	Revenues from Outsiders (i)	Intersegment Transfers (ii)	Operating Expenses (iii)	Profit (i+ii-iii)	Loss (iii-i-ii)
Autos	4,015,000	1,15,000	3,615,000	5,15,000
Trucks	3,515,000	2,15,000	4,015,000		2,85,000
SUVs	2,615,000	0	2,015,000	6,00,000
Motorcycles	915,000	65,000	1,035,000		55,000
Total				1,115,000	3,40,000

Criteria for separately reportable segments is 10% of profit or loss whichever is higher i.e. 10%*1115000 = $111500

Any profits or losses higher than 111500 will be separately reported. i.e. Autos, Trucks and SUVs will be separately reported.

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