Ecru Company has identified five industry segments: plastics, metals, lumber, pa

Question

Ecru Company has identified five industry segments: plastics, metals, lumber, paper. and finance It appropriately consolidated each of these segments in producing its annual financial statements Information describing each segment (in thousands) follows Plastics Metals Lumber Paper Finance $6.694 $2.354 S 71 $422 $ -0- Sales to outside parties Intersegment transfers Interest income from outside parties Interest income from intersegment loans Operating expenses Interest expense Tangible assets Intangible assets Intersegment loans (debt) 138 21 148 173 34 150 654 28 771 63 42 201 31 102 179 1,066 4.214 762 31 1,501 3,196 403 76 524 87 706 Ecru does not allocate its $1,460,000 in common expenses to the various segments Perform testing procedures to determine Ecru's reportable operating segments

Explanation / Answer

1 REVENUE Plastics Metals Lumber Paper Finance Total Sales to outside parties 6694 2354 711 422 0 10181 Inter segment transfers 148 173 138 150 0 609 Interest income from outside parties 0 34 21 0 42 97 Interest income from intersegment loans 0 0 0 0 201 201 Total 6842 2561 870 572 243 11088 Threshold limit based on the revenue (11088*10%) 1108.8 Based on the above threshold limit of revenue, only plastic and metals are reportable segments 2 Profit and Loss Account test Calculate Total Expenditure for each segment Expenditure Plastics Metals Lumber Paper Finance Total Operating Expenses 4214 1762 1066 654 31 7727 Interest expenses 76 31 66 28 102 303 Total 4290 1793 1132 682 133 8030 Plastics Metals Lumber Paper Finance Total Revenue 6842 2561 870 572 243 11088 Expenses -4290 -1793 -1132 -682 -133 -8030 Profit 2552 768 110 3058 Loss -262 -110 -372 Threshold liimit based on the profit (3058*10%) 305.8 Plastic and metal are reportable segments ,as profit or loss greater than or equal to the threshold is reportable, hence only plastic and Metal are reportable 3 Assets Plastics Metals Lumber Paper Finance Total Tangible Assets 1501 3196 524 771 179 6171 Intangible Assets 87 403 0 63 0 553 Intersegment loans ( debt) 0 0 0 0 706 706 Total Assets 1588 3599 524 834 885 7430 Threshold limit based on Assets(7430*10%) 743 As per Assets threshold limit plastic, metal, paper and Finance are the reportable segments

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