Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 13.13P
a
To determine
Enterprise disclosures: ASC 280 provides guidelines for enterprise wide disclosures in financial statements to help users to understand risk and potential return. ASC 280 established the term enterprise wide disclosure standards to provide users more information about the company’s risks. These disclosures are typically made in a footnote to the financial statements.
The segmental disclosure worksheet and schedule showing which segment is reportable.
a
Expert Solution
Answer to Problem 13.13P
Profit as per segment disclosure worksheet
A. $78,000, B. $33,500, C. $50,100 and D. Loss of $13,600
Segment A, B, and C are separately reportable as it passes 10 percent test.
Explanation of Solution
1. Segment disclosure worksheet:
| Operating Segments | Corporate admin $ | Intersegment eliminations $ | Consolidated $ | |||||
| A $ | B $ | C $ | D $ | Combined $ | ||||
| Revenues: | ||||||||
| Sales: | ||||||||
| Non-affiliate | 280,000 | 130,000 | 340,000 | 60,000 | 810,000 | 810,000 | ||
| Intersegment. | 60,000 | 18,000 | 12,000 | 90,000 | (90,000) | |||
| Total revenue | 340,000 | 130,000 | 358,000 | 72,000 | 900,000 | (90,000) | 810,000 | |
| Operating Costs: | ||||||||
| Traceable | (245,000) | (90,000) | (290,000) | (82,000) | (707,000) | 90,000 | (617,000) | |
| Allocated | (17,000) | (6,500) | (17,900) | (3,600) | (45,000) | (45,000) | ||
| 78,000 | 33,500 | 50,100 | (13,600) | 148,000 | 0 | 148,000 | ||
| Other items: | ||||||||
| General expenses | (20,000) | (20,000) | (20,000) | |||||
| Income from continuing operations | 78,000 | 33,500 | 50,100 | (13,600) | (20,000) | 128,000 | 0 | 128,000 |
| Assets: | ||||||||
| Segments | 400,000 | 105,000 | 500,000 | 75,000 | 1,080,000 | 1,080,000 | ||
| General corporate | 120,000 | 120,000 | 120,000 | |||||
| Total Assets | 400,000 | 105,000 | 500,000 | 75,000 | 120,000 | 1,200,000 | 1,200,000 | |
Allocated costs:
A =
B =
C =
D =
2. Schedule showing reportable segments.
Segment is reportable if segment revenue is greater than or equal to 10 percent
| Revenue | Profit | Assets | |||||||
| Segment | $,(000’s) | % | Reportable | $,(000’s) | % | Reportable | $,(000’s) | % | Reportable |
| A | 280 | 35 | Yes | 78 | 53 | Yes | 400 | 37 | Yes |
| B | 130 | 16 | Yes | 33.5 | 22 | Yes | 105 | 10 | Yes |
| C | 340 | 42 | Yes | 50.1 | 34 | Yes | 500 | 46 | Yes |
| D | 60 | 7 | No | (13.6) | -9 | No | 75 | 7 | No |
| Total | 810 | 100 | 148 | 100 | 1,080 | 100 | |||
Segment D does not qualify 10 percent test, hence not reportable. All other segments A, B, C are reportable.
b
To determine
Enterprise disclosures: ASC 280 provides guidelines for enterprise-wide disclosures in financial statements to help users to understand risk and potential return. ASC 280 established the term enterprise-wide disclosure standards to provide users more information about the company’s risks. These disclosures are typically made in a footnote to the financial statements.
The schedule showing which geographical areas are reportable when Division A is in domestic area, and each of the other divisions operates in separate foreign country.
b
Expert Solution
Answer to Problem 13.13P
Domestic Segment A and Foreign Segment B and C are separately reportable.
Explanation of Solution
Schedule showing reportable segments (10 percent materiality test is applied to check the reportibiliy)
Segment is reportable if segment revenue is greater than or equal to 10 percent.
| Revenue | Long − lived assets | |||||
| Segment | $,(000’s) | % | Reportable | $,(000’s) | % | Reportable |
| A | 280 | 35 | Yes | 200 | 37 | Yes |
| B | 130 | 16 | Yes | 52.5 | 10 | Yes |
| C | 340 | 42 | Yes | 250 | 46.3 | Yes |
| D | 60 | 7 | No | 37.5 | 7 | No |
| Total | 810 | 100 | 540 | 100 | ||
Domestic Segment A and Foreign Segment B and C are separately reportable.
c
To determine
Enterprise disclosures: ASC 280 provides guidelines for enterprise-wide disclosures in financial statements to help users to understand risk and potential return. ASC 280 established the term enterprise-wide disclosure standards to provide users more information about the company’s risks. These disclosures are typically made in a footnote to the financial statements.
The amount of sales to an outside customer that would cause that customer to be classified as a major customer.
c
Expert Solution
Answer to Problem 13.13P
The amount of sales that would classify a customer as a major customer is $81,000.
Explanation of Solution
ASC 280 does not provide any separate materiality test for the classification of a major customer, but most of the corporate use a 10 percent materiality test to classify major customers.
In the case of P, the sales greater or equal to $81,000 to a single customer would be regarded as major customer $81,000 =
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Students have asked these similar questions
Windmill Corp. has three manufacturing divisions, each of which has been Determined to be reportable segment. Common costs are appropriately allocated on the basis of each division’s sales in relation to Windmill’s aggregate sales. In the current year, Division 1 had sales of P6,000,000, which was 20%of Windmill’s total sales, and had traceable cost of P3,800,00. Windmill incurred operating cost of P1,000,000 that were not directly traceable to any of the divisions. In addition, Windmill incurred interest expense of P600,000. In reporting segment information, what amount should be shown as operating profit of Division 1 for the current year?
The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows:
Sales
Income fromOperations
InvestedAssets
Division E
$5,000,000
$550,000
$2,400,000
Division F
4,800,000
860,000
2,500,000
Division G
7,000,000
860,000
2,900,000
a. Using the DuPont formula, determine the profit margin, investment turnover, and rate of return on investment for each division. Round profit margin to two decimal places, investment turnover to four decimal places and rate of return on investment to one decimal place.
Division E
Division F
Division G
Profit Margin
%
%
%
Investment Turnover
Rate of return on investment
%
%
%
b. Which division is the most profitable per dollar invested?
Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period:
Total Company
Southern Division
Northern Division
Sales
$
301,300
$
167,900
$
133,400
Variable expenses
$
112,125
$
58,765
$
53,360
Traceable fixed expenses
$
169,600
$
57,200
$
112,400
Common fixed expense
$
60,260
$
33,580
$
26,680
The common fixed expenses have been allocated to the divisions on the basis of sales.
The Northern Division’s break-even sales is closest to: (Round your intermediate calculations to 2 decimal places.)
Chapter 13 Solutions
Advanced Financial Accounting
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