Cineplex Corporation is a diversified company that operates in five different in
ID: 2479100 • Letter: C
Question
Cineplex Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2015.
A B C D E
Sales revenue $52,700 / $79,100 / $581,300 / $39,300 / $54,700
Cost of goods sold 20,300 / 54,800 / 276,400 / 20,300 / 32,600
Operating expenses 9,583 / 52,700 / 241,400 / 12,260 / 18,180
Total expenses 29,883 / 107,500 / 517,800 / 32,560 / 50,780
Operating profit (loss) $22,817 / $(28,400) / $63,500 / $6,740 / $3,920
Identifiable assets $36,400 / $87,200 / $510,400 / $71,300 / $54,800
Sales of segments B and C included intersegment sales of $21,330 and $101,700, respectively.
(a) Determine which of the segments are reportable based on the:
Reportable Segment (1) Revenue test.
(2) Operating profit (loss) test.
(3) Identifiable assets test.
(b) Prepare the necessary disclosures required by GAAP. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Explanation / Answer
Part a)
1) Revenue Test
A segment is reportable as per the Revenue Test only if it has a revenue of atleast 10% of the total revenue (including intersegment revenues) of all thesegments.
Total Revenue of All Segments = 52,700 + 79,100 + 581,300 + 39,300 + 54,700 = $807,100
10% of Total Revenue = 807,100*10% = $80,710
Based on the above calculations, the only reportable segment would be Segment C as it has a revenue of $581,300 which is the more than $80,710 as per the revenue test.
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2) Operating Profit (Loss) Test
A segment is reportable as per the Operating Profit (Loss) Test only if it has a operating profit (loss) of atleast 10% of the total operating profit (loss) of all the segments.
Total of Operating Profit (Loss) of All Segments = 22,817 - 28,400 + 63,500 + 6,740 + 3,920 = $68,577
10% of Total Operating Profit (Loss) = 68,577*10% = $6,858
Based on the above calculations, the reportable segments would be Segment A, B, and C as all of these have operating profit (loss) of more than $6,858 in absolute terms.
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3) Identifiable Assets Test
A segment is reportable as per the Identifiable Asset Test only if it has a identifiable asset of atleast 10% of the total identifiable asset of all the segments.
Total Identifiable Assets of All Segments = 36,400 + 87,200 + 510,400 + 71,300 + 54,800 = $760,100
10% of Total Identifiable Assets = 760,100*10% = $76,010
Based on the above calculations, the reportable segments would be Segment B and C as both of these have indentifiable asset of more than $76,010.
__________
Part b)
Disclosures required by GAAP are provided as follows:
A B C Other Total External Revenues 52,700 57,770 479,600 94,000 684,070 Intersegment Revenues 0 21,330 101,700 0 123,030 Total Revenues 52,700 79,100 581,300 94,000 807,100 Cost of Goods Sold 20,300 54,800 276,400 52,900 404,400 Operating Expenses 9,583 52,700 241,400 30,440 334,123 Total Expenses 29,883 107,500 517,800 83,340 738,523 Operating Profit (Loss) 22,817 -28,400 63,500 10,660 68,577 Identifiable Assets 36,400 87,200 510,400 126,100 760,100 Reconciliation of Revenues Total Segment Revenues 807,100 Less Revenues of Immaterial Segments -94,000 Elimination of Intersegment Revenues -123,030 Revenues of Reportable Segments $590,070 Reconciliation of Operating Profit (Loss) Total Segment Operating Profit 68,577 Less Profits of Immaterial Segments -10,660 Profits of Reportable Segments $57,917 Reconciliation of Assets Total Segment Assets 760,100 Less Assets of Immaterial Segments -126,100 Assets of Reportable Segments $634,000Related Questions
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