Dragon Company has two reportable segments, A and B. Segment A made $3,000,000 o

Question

Dragon Company has two reportable segments, A and B. Segment A made $3,000,000 of sales to external customers and $200,000 of sales to other operating segments. Segment B made sales of $5,000,000 to external customers and $1,200,000 of sales to other operating segments. Dragon Company reported $9,600,000 of revenues on its consolidated income statement. What calculation below correctly determines whether Dragon Company's reportable segments satisfy the 75% revenue test?

a. $8,000,000/$9,600,000

b. $8,000,000/$11,000,000

c. $9,400,000/$9,600,000

d. $9,400,000/$11,000,000

Explanation / Answer

Solution-

'a. $8,000,000/$9,600,000

Calculation-

Sales to External Customer (A & B) = $300,000 +$500,000 = $800,000

Consolidated income statement revenue = $9,600,000

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