E 14-1 Segment disclosures

1. The disclosure requirements for an operating segment do not include:

a. Unusual items

b. Income tax expense or benefit

c. Extraordinary items

d. Cost of goods or services sold

2. A reconciliation between the numbers disclosed in operating segments and consolidated numbers need not be provided for:

a. Cost of goods sold

b. Profit or loss

c. Net assets

d. Revenues

3. Each reportable segment is required to disclose the following information except for:

a. Extraordinary items

b. Depreciation, dpletion and amortization

c. Capital expenditures

d. Gross profit or loss

4. An enterprise is required to disclose information about its major customers if 10% or more of its revenue is derived from any single customer. This disclosure must include:

a. The products or services generating the revenue from such sales

b. The operating segment or segments making such sales and the total revenue from the customer

c. The name of the customer to whom the sales were made

d. The dollar amounts of revenue and any profit or loss on the sales

5. Which of the following is not a criterion for aggregating two or more operating segments?

a. The segments should have similar products or services.

b. The segments should have similar production processes.

c. The distribution of products should be similar.

d. The segments should have similar amounts of revenue.

6. Required segment disclosures in interim-period statements do not include:

a. A measure of segment profit or loss

b. Net interest revenue

c. A description of a change in segmentation from the last annual report

d. lntersegment revenue

E 14-2 Apply threshold tests

Superior Corporation's internal divisions are based on industry. The revenues, operating profits, and assets of the operating segments of Superior are presented in thousands of dollars as follows:

Sales to Non affiliates Inter- segment Sales Total Sales Operating Profit (Loss) Assets

Food service industry $300,000 $40,000 $340,000 $ 40,000 $200,000

Copper mine 80,000 - 80,000 (10,000) 60,000

Information systems 20,000 15,000 35,000 5,000 40,000

Chemical industry 130,000 20,000 150,000 30,500 217,000

Agricultural products 48,000 - 48,000 (15,500) 50,000

Pharmaceutical products 20,000 - 20,000 8,000 18,000

Foreign operations 15,000 - 15,000 5,000 20,000

Corporate assets* 33,000

$613,000 $75,000 $688,000 $63,000 $638,000

*Corporate assets include equity investces of $10,000 and general assets of $23,000.

REQUIRED: Determine the reportable segments of Superior Corporation.

E 14-3 Apply threshold tests-disclosure

Visclosky Corporation operates entirely in the United States but in different industry. It segments the business based on industry. Total sales of the segments, including intersegment sales, are as follows:

Concrete and stone products $200,000

Construction 500,000

Lumber and wood products 900,000

Building materials 500,000

Other 50,000

Further analysis reveals sales from one segment to another as follows:

Lumber and wood products $400,000

Building materials 200,000

REQUIRED:

1. Determine which segments are reportable segments under both the 10% and the 75% revenue tests. 2. Prepare a schedule suitable for disclosing revenue by industry segment for external reporting.

3. Prepare a reconciliation of segment revenue with corporate revenue.

E 14-7 Interim accounting for various situationsTax

1. Interim reporting under APB Opinion No. 28 guidelines refers to financial reporting:

a. On a monthly basis

b. On a quarterly basis

c. On a regular basis

d. For periods less than a year

2. A liquidation of LIFO inventories for interim reporting purposes may create a problem in measuring cost of sales. Accordingly, cost of sales in interim periods should:

a. Be determined using the gross profit method

b. Include the income effect of the LIFO liquidation

c. Include the expected cost of replacing the liquidated LIFO base

d. None of the above

3. Baker Company's effective annual income tax rates for the first two quarters of 2008 are 34% and 30% for the first and second quarter, respectively. Assume that Baker's pretax income is $120,000 for the first quarter and $90,000 for the second quarter. Income tax expense for the second quarter is computed:

a. $27,000

b. $63,000

c. $67,800

d. $22,200

4. Assume corporate tax rates of 15% on the first $50,000 of taxable income, 25% on taxable income between $50,000 and $75,000, 34% on taxable income between $75,000 and $100,000, and 39% on taxable income between $100,000 and $335,000. If a corporation estimates its pretax income at $20,000 for the first quarter, $25,000 for the second quarter, $30,000 for the third quarter, and $35,000 for the fourth quarter, its estimated annual effective tax rate is:

a. 23.77%

b. 25%

c. 24.67%

d. 34%

P 14-1 Apply threshold tests

The following data for 2008 relate to Hawkeye Industries, a worldwide conglomerate:

Sales to Unaffiliated Intersegment Sales Operating Profit (Loss) Assets

Customers

Food $300,000 $50,000 $45,000 $310,000

Chemical 110,000 40.000 23,000 150,000

Textiles 65.000 5,000 (8.000) 60,000

Furniture 48.000 - 9.000 40.000

Beverage 62.000 10.000 18.000 60.000

Oil 15,000 - (2.000) 25.000

Segment 600,000 105,000 85.000 645,000

Corporate - - (7.000) 15,000

Consolidated $600,000 0 $78.000 $660,000

REQUIRED: Answer the following questions related to Hawkeye's required segment disclosures and show computations:

1. Which segments are reportable segments under (a) the revenue test, (b) the operating-profit test, and (c) the asset test?

2. Do additional reportable segments have to be identified?

P 14-3 Apply threshold testsDisclosure

Daton-Paulo Corporation's home country is the United States, but it also has operations in Canada, Mexico, Brazil, and South Africa and reports internally on a geographic basis. Information relevant to Daton-Paulo's operating-segment disclosure requirement for the year ended December 31, 2008, is presented in summary form as follows:

United States Canada Mexico Brazil South Africa Consolidated

Sales to unaffiliated

customers $120,000 $13,000 $20,000 $22,000 $15,000 $190,000

Intersegment transfers 29,000 11,000 10,000

Total revenue $149,000 $24,000 $20,000 $22,000 $25,000 $190,000

Operating profit $ 24,000 $ 6,000 $ 8,000 $ 5,000 $ 7,000 $ 50,000

Identifiable assets $150,000 $30,000 $19,000 $20,000 $31,000 $305,000

REQUIRED 1. Prepare schedules to show which of Daton-Paulo's operating segments require separate disclosure under (a) the 10% revenue test, (b) the 10% asset test, and (c) the 10% profit test.

2. Which of Daton-Paulo's operating segments meet at least one of the tests for segment reporting?

3. Prepare a schedule to disclose Daton-Paulo's segment operations from the information given.

P 14-4 Apply threshold testsSegment and enterprisewide disclosure

Mid-America Corporation has five major operating segments and operates in both domestic and foreign markets. Mid-America is organized internally on an industry basis. Information about its revenue from operating segments and foreign operations for 2008 is as follows (in thousands):

SALES TO UNAFFILIATED CUSTOMERS

Domestic Foreign Total

Foods $ 150 $ 30 $ 180

Soft drinks 650 250 900

Distilled spirits 500 50 550

Cosmetics 200 200

Packaging 110 - 110

Other (four minor segments) 240 240

$1,850 $330 $2,180

SALES TO AFFILIATED CUSTOMERS

Domestic Foreign Total

Foods $ 30 - $ 30

Soft drinks 160 - 160

Distilled spirits - $20 20

Cosmetics - -

Packaging 10 - 10

Other (four minor segments) - -

$200 $20 $220

A Japanese subsidiary of Mid-America operates exclusively in the soft drink market. All other foreign operations are carried out through Canadian subsidiaries, none of which are included in the soft drink business. Only the soft drink and distilled spirits segments are reportable segments under the asset and operating-profit tests for segments.

REQUIRED:

1. Determine which industry segments are reportable segments under the revenue test for segment reporting. Assume no further aggregation is possible. Would the possible aggregation of smaller segments change your response?

2. Prepare a schedule suitable for disclosing Mid-America's revenue by segment for 2008, assuming no further aggregation is possible.

3. Prepare a schedule suitable for disclosing Mid-America's revenue by geographic area for 2008.

P 14-8 Interim reportingtax

Trotter Corporation is subject to income tax rates of 20% on its first $50,000 pretax income and 34% on amounts in excess of $50,000. Quarterly pretax accounting income for the calendar year is estimated by Trotter to be as follows:

Quarter Estimated Pretax Income

First $ 20,000

Second 30,000

Third 60,000

Fourth 50,000

Total $160,000

No changes in accounting principles, discontinued items, unusual or infrequently occurring items, or extraordinary items are anticipated for the year. The fourth quarter's pretax income is, however, expected to include $20,000 in dividends from domestic corporations, for which an 80% dividend-received deduction is available.

REQUIRED

1. Calculate the estimated annual effective tax rate for Trotter Corporation for 2008.

2. Prepare a schedule showing Trotter's estimated net income for each quarter and the calendar year 2008.