Chapter 13, Problem 13.13P

a

To determine

Enterprise disclosures: ASC 280 provides guidelines for enterprise wide disclosures in financial statements to help users to understand risk and potential return. ASC 280 established the term enterprise wide disclosure standards to provide users more information about the company’s risks. These disclosures are typically made in a footnote to the financial statements.

The segmental disclosure worksheet and schedule showing which segment is reportable.

Answer to Problem 13.13P

Profit as per segment disclosure worksheet

A. $78,000, B. $33,500, C. $50,100 and D. Loss of $13,600

Segment A, B, and C are separately reportable as it passes 10 percent test.

Explanation of Solution

1. Segment disclosure worksheet:

	Operating Segments				Corporate admin $		Intersegment eliminations $	Consolidated $
	A $	B $	C $	D $		Combined $
Revenues:
Sales:
Non-affiliate	280,000	130,000	340,000	60,000		810,000		810,000
Intersegment.	60,000		18,000	12,000		90,000	(90,000)
Total revenue	340,000	130,000	358,000	72,000		900,000	(90,000)	810,000
Operating Costs:
Traceable	(245,000)	(90,000)	(290,000)	(82,000)		(707,000)	90,000	(617,000)
Allocated	(17,000)	(6,500)	(17,900)	(3,600)		(45,000)		(45,000)
Profit / loss	78,000	33,500	50,100	(13,600)		148,000	0	148,000
Other items:
General expenses					(20,000)	(20,000)		(20,000)
Income from continuing operations	78,000	33,500	50,100	(13,600)	(20,000)	128,000	0	128,000
Assets:
Segments	400,000	105,000	500,000	75,000		1,080,000		1,080,000
General corporate					120,000	120,000		120,000
Total Assets	400,000	105,000	500,000	75,000	120,000	1,200,000		1,200,000

Allocated costs:

A = $(\$340,000/\$900,000)\times \$45,000=\$17,000$

B = $(\$130,000/\$900,000)\times \$45,000=\$6,500$

C = $(\$358,000/\$900,000)\times \$45,000=\$17,900$

D = $(\$72,000/\$900,000)\times \$45,000=\$3,600$

2. Schedule showing reportable segments.

Segment is reportable if segment revenue is greater than or equal to 10 percent

	Revenue			Profit			Assets
Segment	$,(000’s)	%	Reportable	$,(000’s)	%	Reportable	$,(000’s)	%	Reportable
A	280	35	Yes	78	53	Yes	400	37	Yes
B	130	16	Yes	33.5	22	Yes	105	10	Yes
C	340	42	Yes	50.1	34	Yes	500	46	Yes
D	60	7	No	(13.6)	-9	No	75	7	No
Total	810	100		148	100		1,080	100

Segment D does not qualify 10 percent test, hence not reportable. All other segments A, B, C are reportable.

b

To determine

Enterprise disclosures: ASC 280 provides guidelines for enterprise-wide disclosures in financial statements to help users to understand risk and potential return. ASC 280 established the term enterprise-wide disclosure standards to provide users more information about the company’s risks. These disclosures are typically made in a footnote to the financial statements.

The schedule showing which geographical areas are reportable when Division A is in domestic area, and each of the other divisions operates in separate foreign country.

Answer to Problem 13.13P

Domestic Segment A and Foreign Segment B and C are separately reportable.

Explanation of Solution

Schedule showing reportable segments (10 percent materiality test is applied to check the reportibiliy)

Segment is reportable if segment revenue is greater than or equal to 10 percent.

	Revenue			Long − lived assets
Segment	$,(000’s)	%	Reportable	$,(000’s)	%	Reportable
A	280	35	Yes	200	37	Yes
B	130	16	Yes	52.5	10	Yes
C	340	42	Yes	250	46.3	Yes
D	60	7	No	37.5	7	No
Total	810	100		540	100

Domestic Segment A and Foreign Segment B and C are separately reportable.

c

To determine

Enterprise disclosures: ASC 280 provides guidelines for enterprise-wide disclosures in financial statements to help users to understand risk and potential return. ASC 280 established the term enterprise-wide disclosure standards to provide users more information about the company’s risks. These disclosures are typically made in a footnote to the financial statements.

The amount of sales to an outside customer that would cause that customer to be classified as a major customer.

Answer to Problem 13.13P

The amount of sales that would classify a customer as a major customer is $81,000.

Explanation of Solution

ASC 280 does not provide any separate materiality test for the classification of a major customer, but most of the corporate use a 10 percent materiality test to classify major customers.

In the case of P, the sales greater or equal to $81,000 to a single customer would be regarded as major customer $81,000 = $\$810,000\times .10$