Question

West Corporation reported the following consolidated data for 20X2:

Sales	$	834,000
Consolidated income before taxes		129,000
Total assets		1,210,000

Data reported for West’s four operating divisions are as follows:

	Division A				Division B				Division C				Division D
Sales to outsiders		$	290,000			$	132,000			$	350,000			$	62,000
Intersegment sales			60,000								14,000				12,000
Traceable costs			246,000				91,000				291,000				83,000
Assets			401,000				106,000				501,000				76,000

Intersegment sales are priced at cost, and all goods have been subsequently sold to nonaffiliates. Some joint production costs are allocated to the divisions based on total sales. These joint costs were $46,000 in 20X2. The company’s corporate center had $21,000 of general corporate expenses and $121,000 of assets that the chief operating decision maker did not use in making the decision regarding the operating segments.

Required:
Each of the following items is unrelated to the others.

a. The divisions are industry segments.

(1) Prepare a segmental disclosure worksheet for the company. (Do not round your intermediate calculations.)
  

(2) Prepare schedules showing which segments are reportable.
  

b. Assume that each division operates in an individual geographic area, Division A is in the domestic area, and each of the other divisions operates in a separate foreign country. Assume that one-half of the assets in each geographic area represents long-lived, productive assets as defined in ASC 280. Prepare schedules showing which geographic areas are reportable using a 10 percent materiality threshold.
  

c. Determine the amount of sales to an outside customer that would cause that customer to be classified as a major customer under the criteria of ASC 280.

Answer 1

a.

Operating Segments
	A	B	C	D	Corporate Admin.	Combined	Intersegment Elimination	Consolidated
Revenues:
Sales to unaffilated customers
lated customers	2,90,000	1,32,000	3,50,000	62,000		8,34,000		8,34,000
Intersegment sales	60,000		14,000	12,000		86,000	86,000
Total Revenue	3,50,000	1,32,000	3,64,000	74,000		9,20,000	-86,000	8,34,000
Operating Costs:
Traceable costs	-2,46,000	-91,000	-2,91,000	-83,000		-7,11,000	86,000	-6,25,000
Allocated [WN1]	-17,500	-6,600	-18,200	-3,700		-46,000		-46,000
Segment profit/(loss)	86,500	34,400	54,800	-12,700		1,63,000		1,63,000
Other items:
General Corporate expenses					-21,000	-21,000		-21,000
Income from continuing operations	86,500	34,400	54,800	-12,700	-21,000	1,42,000		1,42,000
Assets:
Segment	4,01,000	1,06,000	5,01,000	76,000		10,84,000		10,84,000
General Corporate					1,21,000	1,21,000		1,21,000
Total Assets	4,01,000	1,06,000	5,01,000	76,000	1,21,000	12,05,000		12,05,000

Working Notes
	WN1 Allocated:
A	$46,000 * $350,000/$920,000=	17500
B	$46,000 * $132,000/$920,000=	6600
C	$46,000 * $350,000/$920,000=	18200
D	$46,000 * $350,000/$920,000=	3700

2	Segments	Revenue	Segment Profits	Segment Assets
	A	Yes	Yes	Yes
	B	Yes	Yes	Yes
	C	Yes	Yes	Yes
	D	No	No	No

Working Notes
i.	Separately reportable if segment revenue is sgreater than or equal to Combined revenue * 0.10 = $920,000 * 0.10 = $92,000
ii.	Separately reportable if separate segment profit or loss greater than or equal to total segment profit(profit of A, B and C * 0.10 = ($86,500+$34,400+$54,800)* 0.10 = $17,570
iii.	Separately reportable if segment assets greater than or equal to $108,400 (total segment assets $10,84,000 * 0.10)

b.

	Country	Revenue	Long-Lived Assets
	A Domestic	Yes	2,00,500	Yes
	B Foreign	Yes	53,000	No
	C Foreign	Yes	2,50,500	Yes
	D Foreign	No	38,000	No
i	i. separately reportable if revenue to outside greater than or equal to $83,400 ( Combined revenue of $834,000 * .10)
ii	ii. Separately reporatble if long- lived, productive assets, which are one-half of total assets, are greater than or equal to (Total Assets $1,084,000/2 = $542,000 * .10) = $54,200
	Foreign countries B and C are separately reportable.

c. As per ASC 280 if revenue from single customerr accounts for 10% or more of entry revenue, then the customer should be reported as major customer.

Company shouldd report revenue from each customer segment reporting the above revenue

Revenue threshold for major customer reporting

Revenue threshold for major customer	10% of entry revenue
Total revenue	8,34,000
Major Customer Threshold	83400

Hence Major Customer sales threshold is $83,400