Taft Corporation operates primarily in the United States. However, a few years a
ID: 2560134 • Letter: T
Question
Taft Corporation operates primarily in the United States. However, a few years ago, it opened a plant in Spain to produce merchandise to sell there. This foreign operation has been so successful that during the past 24 months the company started a manufacturing plant in Italy and another in Greece. Financial information for each of these facilities follows:
The company’s domestic (U.S.) operations reported the following information for the current year:
Taft has adopted the following criteria for determining the materiality of an individual foreign country:
Calculate sales to unaffiliated customers within a country and as a percent of the consolidated sales.
Calculate long-lived assets within a country and as a percentage of the long-lived assets.
Apply Taft’s materiality tests to identify the countries which are 10 percent or more of consolidated sales or consolidated long-lived assets to be reported separately.
Spain Italy Greece Sales $ 175,000 $ 600,000 $ 450,000 Intersegment transfers 0 100,000 60,000 Operating expenses 172,000 206,000 190,000 Interest expense 16,000 29,000 19,000 Income taxes 67,000 19,000 34,000 Long-lived assets 91,000 150,000 100,000Explanation / Answer
Solution:
Calculation of the Sales Unaffiliated Customers within a Country and as Percent of the Consolidated Sales:
Revenue Test (Sales to Unaffiliated Parties):
Calculation of the Long-Lived Assets within a Country and as Percentage of the Long Lived Assets:
Long-lived Asset Test:
Individual Foreign Countries does not Accept the Revenue or Long Lived Assets Materiality Tests, So Foreign Country Must be Reported Separately. In the Problem, the information must be Separately Presented for the United States, but it is Combined for all Other Countries.
United States $4,500,000 78.60% Spain $175,000 3.06% Italy $600,000 10.48% Greece $450,000 7.86% Total $5,725,000 100%Related Questions
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