Question

Sage Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2018.

A B C D E

Sales revenue $40,600 $75,500 $571,400 $34,700 $56,000

Cost of goods sold 19,000 49,000 265,800 18,900 30,300

Operating expenses 9,900 39,800 231,800 12,300 17,900

Total expenses 28,900 88,800 497,600 31,200 48,200

Operating profit (loss) $11,700 $(13,300) $73,800 $3,500 $7,800

Identifiable assets $35,500 $80,300 $499,500 $65,800 $49,400

Sales of segments B and C included intersegment sales of $20,100 and $100,400, respectively.

(a) Determine which of the segments are reportable based on the: Reportable Segment (1) Revenue test. (2) Operating profit (loss) test. (3) Identifiable assets test. (b) Prepare the necessary disclosures required by GAAP. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

A B C

Other Totals External Revenues $ $ $ $ $

Intersegment Revenues

Total Revenues $

Cost of Goods Sold

Operating Expenses

Total Expenses

Operating Profit (Loss) $ $ $ $ $

Identifiable Assets $ $ $ $ $

Answer 1

Solution:-

(a) Determine which of the segments are reportable based on the: Reportable Segment :-

(1) Revenue test:-

10% x $778,200 = 77,820 only segment C ($580,000) meets this test.

Explanation:-

$40,600 + 75,500 +571,400 + 34,700 + 56,000 = 778,200

(2) Operating profit (loss) test:-

10 % x ($11,700 + $73,800 + 3,500 + 7,800) = $9,680 Segment A (11,700) B ( $13,300 absolute value) and C (73,800) all meet the test.

(3) Identifiable assets test:-

10% x $730,500 = 73,050 segment B (80,300) and segment C ($499,500) meet this test.

Explanation:-

$35,500 + $80,300 + $499,500 + $65,800 + $49,400 = $730,500

(b) Prepare the necessary disclosures required by GAAP:-

	A	B	C	Other	Total
External revenues	40,600	55,400	471,000	90,700	657,700
Intersegment Revenues		20,100	100,400		120,500
Total Revenues	40,600	75,500	571,400	90,700	778,200
Cost of goods sold	19,000	49,000	265,800	49,200	383,000
Operating Expenses	9,900	39,800	231,800	30,200	311,700
Total Expenses	28,900	88,800	497,600	79,400	694,700
Operating Profit (Loss)	11,700	(13,300)	73,800	11,300	83,500
Identifiable Assets	35,500	80,300	499,500	115,200	730,500