Question

The various operations of JK Chemicals, Inc., serve five lines of business: pharmaceuticals, paint and paint products, over-the-counter health products, vitamins, and beauty products. Each segment is accounted for separately, with a vice president in charge of each line of business. The results reported by each segment for the fiscal year 2020 were as follows:

	Paint	Beauty	Pharmacy	Vitamins	Health
Sales revenue	1,200,000	2,250,000	2,900,000	850,000	1,650,000
Cost of goods sold	570,000	1,600,000	1,250,000	470,000	900,000
Operating expenses	570,000	1,050,000	1,175,000	420,000	540,000
Total expenses	1,140,000	2,650,000	2,525,000	890,000	1,440,000
Operating profit (loss)	60,000	(400,000)	375,000	(40,000)	210,000
Identifiable assets	1,275,000	2,450,000	2,850,000	945,000	1,950,000

The sales of Health included intersegment sales of $40,000, and Pharmacy sales included intersegment sales of $200,000.

Required:

1. Determine which of the segments are reportable based on the:
   1. Revenue test.
   2. Operating profit (loss) test.
   3. Identifiable assets test.
2. Prepare the necessary disclosures required by GAAP.

Answer 1

Solution:-

a. Revenue test:-

b. Operating profit (loss) test:-

c. Identifiable assets test:-

d. Prepare the necessary disclosures required by GAAP:-

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