Question

Indigo Company is involved in four separate industries. The following information is available for each of the four industries.

Operating Segment		Total Revenue		Operating Profit (Loss)			Identifiable Assets
W		$55,796		$15,220			$182,990
X		9,610		2,410			91,495
Y		24,050		(3,020)			22,085
Z		6,744		1,090			18,930
		$96,200		$15,700			$315,500

Determine which of the operating segments are reportable based on the:

				Reportable Segments
(a)		Revenue test.		select an operating segment WXYZW & XW & YW & ZX & YX & ZY & ZW, X & Y
(b)		Operating profit (loss) test.		select an operating segment WXYZW & XW & ZX & YX & ZY & ZW, X & Y
(c)		Identifiable assets test.

Answer 1

a)

A segment is reportable under revenue test if segment revenue is 10% or more of total segment revenue

Segment	Revenue	% of total segment revenue
W	$55,796	55,796/96,200=58%
X	$9,610	9,610/96,200=9.99%
Y	$24,050	24,050/96,200=25%
Z	$6,744	6,744/96,200=7.01%
Total	$96,200	100%

Reportable segment as per Revenue test are W&Y as the % of total segment revenue is higher than 10% in W&Y

X&Z do not qualify the test as % of total segment revenue is less than 10%

b)

A segment is reportable underIOperating profit(Loss) test if segment absolute amount of Operating profit(Loss) is 10% or more of total segment operating profit or total segment loss whichever is higher.(All % should be presented on psoitive items.

Segment	Revenue	% of total segment operating profit
W	$15,220	15,220/18,720=81.30%
X	$2,410	2,410/18,720=12.87%
Y	($3,020)	3,020/18,720=16.13%
Z	$1,090	1,090/18,720=5.82%

W,X&Y qualify the operating profit(Loss) test and are reportable segment as their absolute amount of profit or loss is grater tahn 10% of total segment operating profit.

Total segment operating profit=$15,220+$2,410+$1,090=$18,720

Total segment oeprating loss=$3,020

Higher of the above is total segment operating profit=$18,700,So the oeprating profit or loss is calculated as % of Total segment operating profit ($18,720)

Note:Absolute amount of profit or loss is taken negative sign or positive sign does not effect calculation

c)

A segment is reportable under Identifiable Asset test if segment identifiable asset is 10% or more of total segment identifiable asset

Segment	identifiable asset	% of total Identifiable asset
W	$182,990	182,990/315,500=58%
X	$91,495	91,495/315,500=29%
Y	$22,085	22,085/315,500=7%
Z	$18,930	18,930/315,500=6%
Total	$315,500	100%

Reportable segment as per identifiable asset test is W&X as segment identifiable asset % to total segment identifiable asset is more than 10%

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