a.
Find the minimum revenue amount which any one segment must generate to be of significant size to require disaggregated disclosure.
a.
Answer to Problem 36P
The minimum revenue amount which any one segment must generate to be of significant size to require disaggregated disclosure is $420,000.
Explanation of Solution
Calculate total revenue of all segments individually
Red | Blue | Green | Pink | Black | White | |
Sales to outside parties | $ 1,811 | $ 812 | $ 514 | $ 309 | $ 121 | $ 99 |
Intersegment revenues | $ 16 | $ 91 | $ 109 | –0– | $ 16 | $ 302 |
Total | $ 1,827 | $ 903 | $ 623 | $ 309 | $ 137 | $ 401 |
Table: (1)
Calculate total amount of revenue for all the segments
Calculate minimum threshold
Thus, minimum threshold is $420,000
Segments having revenue more than $420,000 are to be disclosed. These are red, blue and green.
b.
Determine is company F disclosing disaggregated data for enough segments.
b.
Answer to Problem 36P
Yes, company F is disclosing disaggregated data for enough segments.
Explanation of Solution
Calculate total sales for the company
Calculate total sales for the three segments
Calculate percentage of sales that the segment represents over the total sales
Thus, percentage of sales is 85.57%
The three segments must have 75% or more of total sales of the company. In this case, it is 85.5%. Hence, the three segments make up 85.6% of total sales of the company.
c.
Find the volume of revenues that must a single customer generate to necessitate disclosing the existence of a major customer.
c.
Answer to Problem 36P
The volume of revenues that must a single customer generate to necessitate disclosing the existence of a major customer is $366,600.
Explanation of Solution
Major customer disclosure is based on total sales; it is 10% of total sales. Total sales are calculated in previous sub-part as $3,666,000.
Calculate major customer disclosure
Thus, major customer disclosure is $366,600
d.
Find which segment warrants separate disclosure if each of these six segments has a profit or loss.
d.
Answer to Problem 36P
Segments red, blue, green and white warrants separate disclosure if each of these six segments has a profit or loss.
Explanation of Solution
Calculate total profits and loss
Profit | Loss | |
Red | $ 1,074 | |
Blue | $ 449 | |
Green | $ 140 | |
Pink | $ (94) | |
Black | $ (222) | |
White | $ 308 | |
Total | $ 1,971 | $ (316) |
Table: (2)
Profit is more, hence profit is used to calculate threshold.
Calculate minimum threshold
Thus, minimum threshold is $197,100
Segment having profit more than 10% of profits is to be disclosed. These are red, blue, green and white.
Want to see more full solutions like this?
Chapter 8 Solutions
EBK ADVANCED ACCOUNTING
- Listed below are the current Accounting Assumptions and Principles Economic Entity Assumption Monetary Unit Assumption Historical Cost Principle Going Concern Assumption Revenue Recognition Principle Full Disclosure Principle Time Period Assumption Matching Principle Required: For the following situations, identify whether the situation represents a violation or a correct application of GAAP, and which assumption/principle is applicable. g. Buckner Corp is being sued for $1,000,000. There is a probable chance they will lose. The company disclosed this fact in their notes to their financials. Violation: (Yes/No) Applicable Assumption/Principle: h. Nixon Corp records and maintains their books at cost and/or current value, not at a liquidated value.…arrow_forwardThe following article appeared in the Wall Street Journal. Washington—The Securities and Exchange Commission staff issued guidelines for companies grappling with the problem of dividing up their business into industry segments for their annual reports. An industry segment is defined by the Financial Accounting Standards Board as a part of an enterprise engaged in providing a product or service or a group of related products or services primarily to unaffiliated customers for a profit. Although conceding that the process is a “subjective task” that “to a considerable extent, depends on the judgment of management,” the SEC staff said companies should consider … various factors … to determine whether products and services should be grouped together or reported as segments. Instructions What does financial reporting for segments of a business enterprise involve? Identify the reasons for requiring financial data to be reported by segments. Identify the possible disadvantages of requiring…arrow_forwardWhich statements are correct? Statement 1: Financial statements must be prepared by a publicly-listed entity at least semiannually. Statement 2: An entity shall present the income statement more prominently. Statement 3: Revenues are income that arises from the ordinary course of business activities. Statement 4: Revenues may arise from decrease in liability from primary operations. Statement 5: Generally, revenue is recognized when the earning process is complete and a valid promise of payment has been received. Statement 6: Revenues arise from sale of goods or services, use of entity resources and disposal of noncurrent assets of the businesses. Statement 7: Under the transactions approach, net income is computed as the excess of income over expenses. Statement 8: Under the capital maintenance approach, net income is computed as the excess of ending capital over beginning capital, excluding the effect of investments and withdrawals by owners. Statement 9: Unusual and infrequent items…arrow_forward
- Choose the correct.Which of the following items is not required to be reported in interim financial statements for each material operating segment?a. Revenues from external customers.b. Intersegment revenues.c. Segment assets.d. Segment profit or loss.arrow_forwardWhich of the following items is not required to be reported in interim financial statements for each material operating segment?a. Revenues from external customers.b. Intersegment revenues.c. Segment assets.d. Segment profit or loss.arrow_forwardEach of the following situations relates to a different company. For each of these independent situations, find the missing amounts. How would stakeholders view the financial performance of each company? Explain.arrow_forward
- It is possible for segments to qualify as reportable, but not represent a material portion of the enterprise. What test is applied to ensure the segments reported represent a significant portion of enterprise activity? a.Total internal and external segment revenue exceeds 75% of total consolidated revenue. b.Total segment assets of the reportable segments exceeds 75% of total consolidated assets. c.Total external segment revenue of the reportable segments exceeds 75% of consolidated revenue. d.Combined external segment revenues for reportable segments exceed 75% of internal and external segment revenues.arrow_forwardWhich of the following statements is TRUE concerning the 75% overall size test for operating segments? * A. The total external revenue of all reportable segments is 75% or more of the entity's total external revenue. B. The total intersegment revenue of all reportable segments is 75% or more of the entity's total revenue, both external and intersegment. C. The total external revenue of all reportable segments is 75% or more of the entity's total revenue, both external and intersegment. D. The total external revenue and intersegment revenue of all reportable segments is 75% or more of the entity's total revenue, both external and intersegment.arrow_forwardWhich is not a purpose of the conceptual framework?a. To provide definitions of key terms and fundamental concepts.b. To provide specific guidelines for resolving situations not covered by existing accounting standards.c. To assists accountants in selecting among alternative accounting and reporting methods.d. To assists the International Accounting Standards Board in standard-setting process. 37. Which of the following statements regarding the conceptual framework is incorrect?a. The conceptual framework is concerned with general-purpose financial statements.b. The conceptual framework applies to financial statements of business reporting enterprises both inthe private sector and in the public sectorc. In cases where there is conflict between the conceptual framework and PFRS, the requirement of theconceptual framework will prevaild. The conceptual framework deals with concepts of capitalarrow_forward
- Ten interrelated elements that are most directly related to measuring the performance and financial status of an enterprise are provided below. Assets Distributions to owners Expenses Liabilities Comprehensive income Gains Equity Revenues Losses Investments by owners Instructions Identify the element or elements associated with the 12 items below. a. Arises from peripheral or incidental transactions. b. Obligation to transfer resources arising from a past transaction. c. Increases ownership interest. d. Declares and pays cash dividends to owners. e. Increases in net assets in a period from nonowner sources. f. Items characterized by service potential or future economic benefit. g. Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners. h. Arises from income statement activities that constitute the entity’s ongoing major or central operations. i.…arrow_forwardLiberty Corporation reported the following financial statements: What part of the Liberty’s annual report is written by the company and could a biased view of financial conditions and results? a. Balance Sheet b. Management’s Discussion and Analysis of Financial Condition and Results Operations (MD&A) c. Auditors Report d. Income Statementarrow_forwardWhich of the following statements is (are) true, concerning the Going Concern assumption? When preparing financial statements, management is required to make an assessment of an enterprise’s ability to continue as a going concern which should be at least twelve months from balance sheet date When an enterprise has a history of profitable operations and ready access to financial resources it is not a detailed analysis as to is ability to operate as a going concern is not necessary When the financial statements are not prepared on a going-concern basis, this fact should be disclosed I and II only II and III II and III only I, II, and IIIarrow_forward
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage