File: Chapter 08 – Segment and Interim Reporting
1. Generally accepted accounting principles require a U.S. corporation to disclose the following
disaggregated information for each operating segment, except:
A) Revenues from external customers.
B) Unusual items.
C) Cost of goods sold.
D) Depreciation expense.
E) Intersegment revenues.
2. Which tests must a company use to determine which operating segments require separate
disclosure?
A) Revenue test and asset test.
B) Revenue test, profit or loss test, and asset test.
C) Revenue test and profit or loss test.
D) Profit or loss test and asset test.
E) Revenue test, asset test, and liability test.
3. Coulanger Corp. identified four operating segments: A, B, C, and D. Segment A met the
revenue test for identifying reportable segments while Segment C met the revenue test, profit or
loss test, and asset test. Segment B and Segment D did not meet any of these tests. Which of
these segments must be disclosed separately?
Segment A
Segment B
Segment C
Segment D
A)
Yes
Yes
No
No
B)
Yes
Yes
Yes
Yes
C)
Yes
No
Yes
No
D)
No
Yes
No
Yes
E)
No
No
Yes
Yes
4. Kaycee Corporation’s revenues for the year ended December 31, 2017, were as follows:
Consolidated Revenue per the Income Statement: $1,200,000
Division 1 Intersegment Sales: $180,000
Division 2 Intersegment Sales: $60,000
For purposes of the Revenue Test, what amount will be used as the benchmark for determining
whether a segment is reportable?
A) $ 24,000.
B) $120,000.
C) $138,000.
D) $144,000.
E) $ 0.
5. According to the revenue test, which segments would require disaggregation?
A) A, B, D, and E.
B) A and B.
C) B and C.
D) A, B, and D.
E) C, D, and E.
6. According to the profit or loss test, which segments would require disaggregation?
A) A, B, D, and E.
B) A, B, C, and E.
C) A, B, and D.
D) A and D.
E) A only.
7. For purposes of the profit or loss test, segment C’s operating profit or (loss) is
A) $1,300,000.
B) $ 700,000.
C) $2,000,000.
D) $ 200,000.
E) $ (200,000.)
8. When totaling the revenues to use as the basis for the 75% rule, what is the 75% hurdle that
must be exceeded by the revenues of the reportable segments?
A) $ 1,670,000.
B) $12,525,000.
C) $15,487,500.
D) $16,700,000.
E) $20,650,000.
9. When defining a reportable segment, which of the following conditions would be sufficient to
allow a company to combine two operating segments for purposes of testing?
A) The products sold by each segment are produced in the same plant.
B) Both segments have several customers in common.
C) The segments may sell different products, but they have a similar economic environment and
similar business activities.
D) Both segments are required to adhere to U.S. Department of Labor regulations regarding
immigration laws.
E) Both segments are owned by the same parent company.
10. Combined segment revenues are calculated to be
A) $29,400.
B) $25,200.
C) $26,600.
D) $28,000.
E) $27,300.
11. What is the minimum amount of revenue that each of these segments must earn to be
considered separately reportable?
A) $2,730.
B) $2,660.
C) $2,800.
D) $2,940.
E) $2,520.
12. The Rivers Co. had four separate operating segments:
What amount of revenues must be generated from one customer before that party must be
identified as a major customer?
A) $57,680.
B) $64,960.
C) $52,640.
D) $78,960.
E) $63,560.
Blueberries
Cherries
Gooseberries
Grapes
Sales to outsiders
$ 172,200
$ 113,400
$ 133,000
$ 107,800
Intersegment revenue
transfers
43,400
36,400
18,200
25,200
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-6
Learning Objective: 08-05
Topic: Entitywide information―Major customers
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Total External Sales Revenue $172,200 + $113,400 + $133,000 + $107,800 =
$526,400 × 10% = $52,640
[QUESTION]
13. Which one of the following items must be disclosed for all reportable operating segments in
the notes to financial statements?
(I.) Revenue from external customers.
(II.) Total Segment Assets
(III.) Revenues from foreign customers, identified by country.
A) I, II, and III
B) I and III only
C) II and III only
D) I and II only
E) There is no requirement of information to disclose for operating segments.
14. Kurves Corp. had six different operating segments reporting the following operating profit
and loss figures:
Which one of the following statements is true?
A) Segment A is a reportable segment based on this test.
B) Segment B is a reportable segment based on this test.
C) Segment E is a reportable segment based on this test.
D) Segment C is not a reportable segment based on this test.
E) Segment D is a reportable segment based on this test.
Profit or
Segment
(Loss)
A
$ 112,000
B
(196,000)
C
1,316,000
D
(616,000)
E
(126,000)
F
(140,000)
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-7
Answer: E
Learning Objective: 08-02
Topic: Reportable segment―Profit or loss test
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Total Profitable Segments Amount = $2,044,000 × 10% = $204,400 Segment Profit or
Loss Threshold
REFERENCE: 08-03
Retro Corp. was engaged solely in manufacturing operations. The following data pertain to the
operating segments for 2017:
[QUESTION]
REFER TO: 08-03
15. What is the minimum amount of revenue that each of these segments must earn to be
considered separately reportable?
A) $4,343,684.
B) $4,826,316.
C) $5,067,632.
D) $4,585,000.
E) $4,705,658.
16. What is the minimum amount of profit or loss that each of these segments must earn to be
Operating
Total
Assets at
Segment
Revenue
Profit
12/31/17
A
$ 14,000,000
$ 2,450,000
$ 28,000,000
B
11,200,000
1,960,000
24,500,000
C
8,400,000
1,680,000
17,500,000
D
4,200,000
770,000
10,500,000
E
5,950,000
945,000
9,800,000
F
2,100,000
315,000
4,200,000
$ 45,850,000
$ 8,120,000
$ 94,500,000
considered separately reportable?
A) $769,263.
B) $812,000.
C) $854,737.
D) $897,000.
E) $833,368.
17. What is the minimum amount of assets that each of these segments must own to be
considered separately reportable?
A) $ 9,450,000.
B) $ 8,624,272.
C) $10,643,000.
D) $12,936,408.
E) $10,413,000.
18. Which of the following statements is true regarding the identifying factors used to determine
which components of a business are operating segments?
A) Operating segments are components of an enterprise that engage in business activities and
from which it only recognizes revenues.
B) The corporate controller reviews each operating segment’s operating results to assess
performance.
C) A component may be classified as an operating segment without revenues assuming that it
generates a material level of expense.
D) An organizational unit can be an operating segment even if all of its revenues or expenses
result from transactions with other segments.
E) All parts of a company must be included in an operating segment.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-9
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
AICPA: FN Measurement
[QUESTION]
19. A company that generates reports by both geographic region and product line must consider
additional criteria in identifying operating segments when there are multiple sets of reports.
Which of the following statement(s) is correct?
(I.) An operating segment has a segment manager who is directly accountable to the chief
operating decision maker for its financial performance.
(II.) If more than one set of organizational units exists, each organizational unit is considered an
operating segment even if there is only one set for which segment managers are held responsible.
(III.) If segment managers exist for two or more overlapping sets of organizational units, the
nature of the business activities must be considered.
A) I, II, and III.
B) I and III only.
C) I and II only.
D) II and III only.
E) None of the above.
20. Which of the following is not one of the criteria management should consider in determining
whether business activities and environments of an operating segment are similar?
A) The geographical location of the operations.
B) The nature of the production process.
C) The distribution methods.
D) The nature of the regulatory environment, if applicable.
E) The type or class of customer.
21. The Hardware operating segment of Bloom Corporation has the following revenues for the
year ended December 31, 2018:
For purposes of the revenue test, what amount will be used as total revenues of the Hardware
operating segment?
A) $417,000.
B) $440,000.
C) $424,000.
D) $460,000.
E) $480,000.
22. Which of the following statements is false concerning the number of operating segments that
should be disclosed?
A) At least 75 percent of total company sales made to outsiders should be presented.
B) Even though an operating segment has been reportable in the past and is of continuing
significance, it must meet at least one of the three reporting tests to report separately in the
current year.
C) If the 75 percent rule is not met by the results of applying all three reporting tests, additional
segments must be disclosed separately despite their failure to satisfy even one of the three
quantitative thresholds.
D) If an operating segment qualifies for disclosure in the current year, prior period segment data
presented for comparative purposes must be restated to reflect the newly reportable segment as a
separate segment.
E) The practical limit to the number of operating segments is 10.
23. Whitley Corporation identified four operating segments: Automotive, Electrical, Lawn
Equipment, and Sporting Goods. Automotive met the revenue test and the profit or loss test.
Electrical met all three tests. Lawn Equipment met only the asset test. Sporting Goods did not
meet any of the three tests. Which of these segments must be disclosed separately?
Sales to outsiders
$ 417,000
Intersegment transfers
23,000
Interest revenue
–
outsiders
7,000
Interest revenue
–
intersegment loans
33,000
Automotive
Electrical
Lawn Equipment
Sporting Goods
A)
Yes
Yes
Yes
Yes
B)
No
Yes
No
No
C)
Yes
Yes
Yes
No
D)
Yes
Yes
No
No
E)
No
No
No
Yes
24. Which one of the following items is not required to be disclosed for each operating segment?
A) Factors used to identify operating segments.
B) Products and services from which each segment derives its revenues.
C) Revenues from external customers.
D) Factors used to allocate company-wide expenses.
E) Revenues from transactions with other operating segments.
25. The following items are required to be disclosed for each operating segment except:
A) Factors used to allocate company-wide pension expense.
B) Revenues from transactions with other operating segments.
C) Interest revenue and interest expense.
D) Depreciation, depletion, and amortization expense.
E) Revenues from external customers.
Dean Hardware, Inc. is comprised of five operating segments. Information about each of these
segments is as follows (in thousands):
[QUESTION]
REFER TO: 08-04
26. What is the total amount of revenues in applying the revenue test?
A) $794.
B) $808.
C) $892.
D) $906.
E) $934.
27. Which operating segments are reportable under the revenue test?
A) Pails and Hardware.
B) Rakes, Pails, and Hardware.
C) Rakes, Hardware, and Accessories.
D) Rakes and Pails.
E) Rakes and Hardware.
Rakes
Pails
Shovels
Hardware
Accessories
Sales to outsiders
$ 94
$506
$44
$122
$28
Intersegment transfers
4
26
14
30
24
Interest revenue
–
outsiders
2
–
4
8
–
Interest revenue
–
intersegment
–
6
–
–
22
Operating expenses
–
outsiders
116
414
40
102
26
Operating expenses
–
intersegment
2
20
6
16
22
Interest expense
–
12
–
2
22
Income taxes
(4)
10
4
6
2
Tangible assets
18
116
12
12
8
Intangible assets
–
–
4
8
6
Intersegment receivables
8
6
–
–
–
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-13
AICPA: FN Measurement
Feedback: $934,000 × 10% = $93,400
[QUESTION]
REFER TO: 08-04
28. In applying the profit or loss test, what is the minimum amount an operating segment must
have in order to meet the profit or loss test for a reportable segment?
A) $ 8.2.
B) $ 9.0.
C) $10.4.
D) $13.0.
E) $82.0.
29. Which operating segments are reportable under the profit or loss test?
A) Rakes, Pails, and Shovels.
B) Rakes, Pails, Shovels, and Hardware.
C) Rakes, Pails, and Hardware.
D) Rakes, Pails, Shovels, Hardware, and Accessories.
E) Pails and Hardware.
30. In applying the asset test, what is the minimum amount an operating segment must have in
order to meet the asset test for a reportable segment?
A) $12.5.
B) $15.2.
C) $17.2.
D) $18.4.
E) $19.8.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-14
Learning Objective: 08-02
Topic: Reportable segment―Asset test
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: Rakes $26 + Pails $122 + Shovels $16 + Hardware $20 + Acc. $14 = Total Assets
$198 × 10% = $19.8 Minimum for Reporting
[QUESTION]
REFER TO: 08-04
31. Which operating segments are reportable under the asset test?
A) None.
B) Pails.
C) Rakes, Pails, and Shovels.
D) Rakes and Hardware.
E) Rakes, Pails, and Hardware.
32. What is the minimum amount of revenue an operating segment must have to be considered a
reportable segment?
A) $12,000.
B) $15,000.
C) $15,500.
D) $16,200.
E) $16,700.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-15
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: External Rev ($40,000 + $50,000 + $60,000) + I/E Sales ($2,000 + $10,000) =
$162,000 × 10% = $16,200
[QUESTION]
REFER TO: 08-05
33. According to the revenue test, which segment(s) are separately reportable?
A) Silver only.
B) Crystal and Silver.
C) China and Crystal.
D) China and Silver.
E) China, Crystal, and Silver.
34. What is the minimum amount of revenue an operating segment must have to be considered a
reportable segment?
A) $3,900.
B) $4,000.
C) $4,100.
D) $4,200.
E) $4,400.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-16
[QUESTION]
REFER TO: 08-06
35. According to the revenue test, which segment(s) are separately reportable?
A) Mowers only.
B) Mowers and Edgers.
C) Mowers and Weedeaters.
D) Edgers and Weedeaters.
E) Mowers, Edgers, and Weedeaters.
36. What amount of revenue must be generated from one customer before such party must be
identified as a major customer?
A) $3,900.
B) $4,000.
C) $4,100.
D) $4,200.
E) $4,400.
37. What is the minimum amount of revenue an operating segment must have to be considered a
reportable segment?
A) $650,000.
B) $660,000.
C) $670,000.
D) $680,000.
E) $690,000.
38. What is the operating profit or loss for the VCRs segment?
A) $121,000 profit.
B) $121,000 loss.
C) $124,000 profit.
D) $124,000 loss.
E) $500,000 profit.
39. What is the minimum amount of operating profit or loss an operating segment must have to be
considered a reportable segment?
A) $124,000.
B) $127,600.
C) $100,000.
D) $130,000.
E) $140,000.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-18
AICPA: FN Measurement
Feedback: DVDs $1,000,000 + MP3s $400,000 = Total Profitable Segments $1,400,000 × 10% =
$140,000 Threshold for Segment Profit/Loss Reporting
[QUESTION]
REFER TO: 08-07
40. What is the minimum amount of assets an operating segment must have to be considered a
reportable segment?
A) $ 1,400,000.
B) $ 2,500,000.
C) $ 4,100,000.
D) $ 5,000,000.
E) $25,000,000.
41. Which operating segments are separately reportable under the revenue test?
A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.
42. Which operating segments are separately reportable under the operating profit or loss test?
A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Page 8-19
Learning Objective: 08-02
Topic: Reportable segment―Profit or loss test
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Critical Thinking
AICPA: FN Measurement
Feedback: All Segments with Profits/Losses > $140,000 Threshold for Segment Profit/Loss
Reporting
[QUESTION]
REFER TO: 08-07
43. Which operating segments are separately reportable under the asset test?
A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.
44. Which of the segments are separately reportable?
A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.
45. Which of the following statements is true according to U.S. GAAP regarding operating
segment disclosure?
A) The measurement of segment profit and loss disclosure need not be similar to the
measurement provided to the chief operating decision maker.
B) Segment information does not have to be in accordance with generally accepted accounting
principles.
C) Disclosure of a major customer’s identity is required.
D) Geographic area information must be disclosed in interim financial statements.
E) Immaterial items must be disclosed.
46. Which of the following is a criterion for determining whether an operating segment is
separately reportable?
A) An operating segment’s assets are 10 percent or more of combined segment assets.
B) An operating segment’s assets are 10 percent or more of consolidated assets.
C) An operating segment’s assets are 10 percent or more of combined segment liabilities.
D) An operating segment’s assets are 10 percent or more of consolidated liabilities.
E) An operating segment’s assets are 10 percent or more of corporate assets.
47. Which of the following operating segment disclosures is not required by U.S. GAAP?
A) Interest expense.
B) Intersegment sales.
C) Unusual items.
D) Depletion.
E) Liabilities.
48. Vapor Corporation has a fan products operating segment. With respect to the following,