Question

Mason Company has prepared consolidated financial statements for the current year and is now gathering information in connection with the following five operating segments it has identified.

	Company Total				Books				Computers				Maps				Travel				Finance
Sales to outside parties	$	1,547			$	121			$	696			$	416			$	314			$	0
Intersegment sales		421				24				240				39				118				0
Interest income—external		97				60				0				0				0				37
Interest income—intersegment loans		147				0				0				0				0				147
Assets		3,398				206				1,378				248				326				1,240
Operating expenses		1,460				115				818				304				190				33
Expenses—intersegment sales		198				70				51				31				46				0
Interest expense—external		107				0				0				0				0				107
Interest expense—intersegment loans		147				21				71				38				17				0
Income tax expense (savings)		21				12				(41	)			27				31				(8	)
General corporate expenses		55
Unallocated operating costs		80

Determine the reportable segments by performing each applicable test. (Figures are in thousands.)

1. Revenue test:

2. Profit or loss test:

3. Asset test:

Answer 1

Revenue Test: Segment Revenue >= 10% Entity's Total Revenue

Entity's Total Revenue (including inter segment sales) = $1547 + $421 = $1968

10% Entity's Total Revenue (including inter segment sales) = 10% of $1968 = $196.8

Books	$                          145
Computers	$                          936
Maps	$                          455
Travel	$                          432
Finance	$                             -

Thus, under the revenue test, the reportable segment are Computers, Maps and Travel.

Profit or Loss Test: Segment Profit or Loss >= 10% of the greater of absolute amount of :

(i) Combined Operating Profit of all the segments that had a profit

(ii) Combined Operating Loss of all the segments that had a loss

In the given problem,

Segment	Sales	Operating Expenses	Allocation of Unallocated Operating Cost	Operating Profit / Loss
Books	$ 145	$               185	$ 4	$               (44)
Computers	$ 936	$               869	$ 26	$ 41
Maps	$ 455	$               335	$ 13	$               107
Travel	$ 432	$               236	$ 12	$               184
Finance	$ -	$                  33	$ -	$               (33)
Total	$ 1,968	$            1,658	$ 55

(i) Combined Operating Profit of all the segments that had a profit = $332

(ii) Combined Operating Loss of all the segments that had a loss = $77

10% of the greater of absolute amount = 10% of $332 = $33.20

Thus, under the profit and loss test, the reportable segment are Books, Computers, Maps and Travel.

Asset Test: Segment Asset >= 10% Entity's Total Assets

Entity's total asset = $3398

10% Entity's Total Assets = $339.8

Segment	Assets
Books	$ 206
Computers	$ 1,378
Maps	$ 248
Travel	$ 326
Finance	$ 1,240
Total	$ 3,398

Thus, under asset test, the reportable segment are Computers and Finance

Thus combining all the three test, the reportable segments are:

Books, Computers, Maps, Travel and Finance.

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