Ecru Company has identified five industry segments: plastics, metals, lumber, paper, and finance. It appropriately consolidated each of these segments in producing its annual financial statements. Information describing each segment (in thousands) follows: Plastics Metals Lumber Paper FinanceSales to outside parties$6,325 $2,144 $636 $347 $0 Intersegment transfers 108 131 96 108 0 Interest income from outside parties 0 19 6 0 27 Interest income from intersegment loans 0 0 0 0 159 Operating expenses 3,914 1,612 916 579 16 Interest expense 61 16 51 31 87 Tangible assets 1,291 2,986 314 561 104 Intangible assets 72 361 0 48 0 Intersegment loans (debt) 0 0 0 0 664 Ecru does not allocate its $1,250,000 in common expenses to the various segments. Perform testing procedures to determine Ecru’s reportable operating segments. Revenue test:Profit or loss test:Asset test:

1. In Revenue test : Segments which are having more than 10% of the the total revenue will be reported 2. In profit or loss test: Segments which are having more than 1. Revenue Test Plastic Metals Lumber Paper Finance Total Sales to outside Parties 6325 2144 636 347 0 Intersegment Transfers 108 131 96 108 0 Interest income from outside Parties 0 19 6 0 27 Interest income from intersegment loans 0 0 0 0 159 Total 6433 2294 738 455 186 10106 Percentage 63.66% 22.70% 7.30% 4.50% 1.840% Reportable/ Non Reportable Reportable Reportable Non Reportable Non Reportable Non Reportable Reason > 10% > 10% <10% <10% <10% 10% profit or loss should be reported 3. Asset: segments having more than 10% of total assets should be reported2.Profit or loss Test: Plastic Metals Lumber Paper Finance Total Revenue 6433 2294 738 455 186 10106 Expenses: Operating Expense 3914 1612 916 579 16 Interest Expense 61 16 51 31 87 Profit 2458 666 3124 Loss 229 155 83 467 Reportable/Non Reportable Reportable Reportable not Reportable Not Reportable Not Reportable Reason >312.4 >312.4 <312.4 <312.4 <312.4 Since 3124 is greater 467, we take 3124 as the base 3. Asset test: Plastic Metals Lumber Paper Finance Total Assets: Tangible Assets 1291 2986 314 561 104 Intangible Assets 72 361 0 48 0 Intersegment loans (Debt) 0 0 0 0 664 Total 1363 3347 314 609 768 6401 Percentage 21.29% 52.29% 4.91% 9.51% 12.00% Reportable/Non Reportable Reportable Reportable Non Reportable Non Reportable Reportable Reason > 10% > 10% < 10% < 10% > 10%

Answered: It appropriately consolidated each of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ecru Company has identified five industry segments: plastics, metals, lumber, paper, and finance.

It appropriately consolidated each of these segments in producing its annual financial statements. Information describing each segment (in thousands) follows:

	Plastics		Metals	Lumber		Paper	Finance
Sales to outside parties	$	6,325		$	2,144		$	636	$	347	$	0
Intersegment transfers		108			131			96		108		0
Interest income from outside parties		0			19			6		0		27
Interest income from intersegment loans		0			0			0		0		159
Operating expenses		3,914			1,612			916		579		16
Interest expense		61			16			51		31		87
Tangible assets		1,291			2,986			314		561		104
Intangible assets		72			361			0		48		0
Intersegment loans (debt)		0			0			0		0		664

Ecru does not allocate its $1,250,000 in common expenses to the various segments.

Perform testing procedures to determine Ecru’s reportable operating segments.

Revenue test:
Profit or loss test:
Asset test:

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