Question

In: Accounting

Please explain why $140,000. Elektronix, Inc. has three operating segments with the following information: DVDs VCRs...

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.

Solutions

Expert Solution

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

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