In: Accounting
Please explain why $140,000.
Elektronix, Inc. has three operating segments with the following information: DVDs VCRs MP3s Sales to outsiders $ 4,000,000 $ 500,000 $ 2,000,000 Intersegment transfer none none $ 100,000 Segment expenses $ 3,000,000 $ 624,000 $ 1,700,000 Segment assets $ 14,000,000 $ 6,000,000 $ 5,000,000 What is the minimum amount of operating profit or loss an operating segment must have to be considered a reportable segment? A) $124,000. B) $127,600. C) $100,000. D) $130,000. E) $140,000.
Answer: |
Profit /Loss from Sale of DVD's = Sales to outsiders (-) Segment expenses = $ 4,000,000 (-) $ 3,000,000 = $ 1,000,000 (Profit ) |
Profit /Loss from Sale of VCR's = Sales to outsiders (-) Segment expenses = $ 500,000 (-) $ 624,000 = ($ 124,000) (Loss ) |
Profit /Loss from Sale of DVD's = Sales to outsiders (+) Intersegment transfer (-) Segment expenses + = $ 2,000,000 (+) $ 100,000 (-) $ 1,700,000 = $ 400,000 (Profit ) |
The minimum amount of operating profit
or loss an operating segment must have to be considered a
reportable segment = 10% of Combined profit from Profitable Segments = 10 % x ( $ 1,000,000 + $ 400,000 ) = 10% x $ 1,400,000 = $ 140,000 |
Option (E) is Correct |