Question

Building Consolidators, Ltd. Identified five industry segments: (1) plastics, (2) metals, (3) lumber, (4) paper, and (5) finance. Each of these segments had been consolidated appropriately by the company in producing its annual financial statements. Information describing each segment is presented in the table below (in thousands).

(in thousands)	Plastics	Metals	Lumber	Paper	Finance
Sales to outside parties	$    8,215	$    2,787	$     827	$     451	$         0
Inter-segment revenues transfers	138	170	125	140	0
Interest income from outside parties	0	25	8	0	242
Interest income from inter-segment loans	0	0	0	0	207
Operating expenses	5,088	2,096	1,191	753	21
Interest expense	79	21	66	40	113
Tangible assets	1,678	3,882	408	729	135
Intangible assets	94	469	0	62	863

1) Using the revenue test, determine which of these segments was separately reportable.

2) Using the profit or loss test, determine which of these segments was separately reportable.

3) Using the asset test, determine which of these segments was separately reportable.

Answer 1

(1). Revenue Test;

	Plastics	Metals	Lumber	Paper	Finance	Total
Sales to outside parties	$8215	$2787	$827	$451	$0	$12280
Inter-segment revenues transfers	$138	$170	$125	$140	$0	$573
Interest income from outside parties	$0	$25	$8	$0	$242	$275
Interest income from inter-segment loans	$0	$0	$0	$0	$207	$207
Total	$8353	$2982	$960	$591	$449	$13335

Total revenue = $13335

10% of total revenue ($13335 * 10 / 100) = $1333.50

Thus on the basis of above calculation it is clear that revenues of Plastics and Metals are separately reportable because these segment have equal or more than $1333.50 revenues.

(2). Profit and Loss Test;

	Plastics	Metals	Lumber	Paper	Finance	Total
Total Revenue	$8353	$2982	$960	$591	$449	$13335
Less: Expenses;
Operating expenses	($5088)	($2096)	($1191)	($753)	($21)	($9149)
Interest expense	($79)	($21)	($66)	($40)	($113)	($319)
Profit (Loss)	$3186	$865	($297)	($202)	$315	$3867

Total Profits = $3867

10% of total profits ($3867 * 10 / 100) = $386.70

Thus on the basis of above calculation it is clear that profits of Plastics is separately reportable because this segments has equal or more than $386.70 profits.

(3). Assets Test;

	Plastics	Metals	Lumber	Paper	Finance	Total
Tangible assets	$1678	$3882	$408	$729	$135	$6832
Intangible assets	$94	$469	$0	$62	$863	$1488
Total assets	$1772	$4351	$408	$791	$998	$8320

Total Assets = $8320

10% of total assets ($8320 * 10 / 100) = $832

Thus on the basis of above calculation it is clear that total assets of Plastics, Metals and Finance segments are separately reportable because these segment have equal or more than $832 total assets.