Howard Corporation has six different operating segments reporting the following

Question

Howard Corporation has six different operating segments reporting the following operating profit and loss figures A S80,000 profit D $440,000 loss B 140,000 loss C 100,000 profitF 170,000 profit E 50,000 profit With respect to the profit or loss test, which of the following statements is not true? a. A is a reportable segment based on this one test. b. C is not a reportable segment based on this one test. c. E is not a reportable segment based on this one test. d. F is a reportable segment based on this one test.

Explanation / Answer

b. C is not a reportable segment based on this one test.

Reportable segments are those segment which has Profit or loss of 10% or more of the greater of (a) the combined profit of profit-making operating segments, and (b) the combined loss of loss-making operating segments.

(a) the combined profit of profit-making operating segments.

80000 + 50000 + 170000 = 300000

(b) the combined loss of loss-making operating segments.

140000 + 440000 = 580000

C's profit = 100000 * 100 / 580000 = 17.24% which is more than 10%, so it is reportable segment.

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