(Note: This is a Kaplan CPA Review Question) The following information pertains
ID: 2453513 • Letter: #
Question
(Note: This is a Kaplan CPA Review Question) The following information pertains to Aria Co. (Aria) and its operating segments for the year ended December 31, 20X6: Sales to unaffiliated customers $2,000,000 Intersegment sales of products $600,000 Interest earned on loans to other industry segments $40,000 Aria and all its divisions are engaged solely in manufacturing operations. Aria evaluates divisional performance based on controllable contribution by segments. Aria has a reportable segment if that segment's revenue exceeds: $200,000 $260,000 $204,000 $264,000
Explanation / Answer
In financial reporting literature, such components of a company that generate their own revenues and incur expenses, that are reviewed separately by management from a decision-making perspective and for which separate financial information is available, are called operating segments.
Revenues (internal or external) are 10% or more of the combined revenue of all operating segments so combined revenues are $2,000,000 + $600,000 + $40,000 = $2,640,000
So 10% of 2640000 is $264000 which is a reportable segment .
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