Question

1. Use the following information to complete the Revenue and asset test for industry segments:

Industry Segment	External Customers	Intersegment Sales	Assets
A	80,000.00		310,000.00
B	240,000.00		720,000.00
C	20,000.00	20,000.00	120,000.00
D	220,000.00	160,000.00	980,000.00
E	20,000.00	75,000.00	270,000.00
Total	580,000.00	255,000.00	2,400,000.00

1. Which of the operating segments would be considered reporting segments under the "revenue" test?

2. Which of the operating segments would be considered reporting segments under the "asset" test?

Answer 1

Which of the operating segments would be considered reporting segments under the "revenue" test? (Answer = B.D.E)

Which of the operating segments would be considered reporting segments under the "asset" test? (Answer = A,B.D.E)

Reportable segment for Revenue
10% or more of Total revenue (Internal and External both) is considered a reportable segment.
Industry Segment	External Customers	Intersegment	Total revenue
A	$          80,000		$          80,000
B	$        240,000		$        240,000
C	$          20,000	$          20,000	$          40,000
D	$        220,000	$        160,000	$        380,000
E	$          20,000	$          75,000	$          95,000
Total	$        580,000	$        255,000	$        835,000

10% of Total revenue = 835000* 10% = $ 83500

From above Total Revenue, segment have more or equal to $ 83500 is considered under reporting segments.

(Repotable segment = B,D,E)

If total external revenue reportable by operating segments is less than 75% of total external revenue then additional segment needs to be identified, even if they don't meet the 10% tests.
Industry Segment
B	$        240,000
D	$        220,000
E	$          20,000
External revenue reporatable by operating segment	$        480,000
Percentage of Total external revenue (480000/580000)	83%
(Hint: No need to be identified in the additional segment.)

Part 2

Reportable segment for Assets
10% or more of Total Assets is considered as reportable segment.
Industry Segment	Assets
A	$        310,000
B	$        720,000
C	$        120,000
D	$        980,000
E	$        270,000
Total	$    2,400,000

10% of Total assets = 2,400,000* 10% = $ 240,000

From above Total assets, segment have more or equal to $ 240,000 is considered under reporting segments.

(Repotable segment = A,B,D,E)