You are on page 1of 1

PAGE 1

PRACTICAL ACCOUNTING PROBLEMS I SUGGESTED SOLUTIONS Segment and Interim Reporting 1. According to the Quantitative Thresholds under PFRS 8, an operating segment will be a reportable segment if it qualifies in at least one of the three tests. Therefore there are five reportable segments: A, B, C, E for Revenue and D for Assets. (Answer is letter C) Segment A B C D E Total Profit 40,000,000 15,000,000 5,000,000 . . 60,000,000 Loss

2.

20,000,000 4,000,000 24,000,000

A segment is a reportable segment if its profit or loss is at least 6M (60M x 10%). B Segments A, B and D are reportable segments. 3. A customer is considered a major customer if sales to a single customer is at least 5M A (50M x 10%). External revenue reported by the operating segments should be at least 37.5M (50M x 75%). 4. Minimum revenue to be reportable (40M + 10M) x 10% D

5,000,000 C

All the divisions are engaged in manufacturing and not financing, therefore the interest is other income and not revenue 5. Sales Traceable expenses Allocated indirect expenses Interest Income taxes Profit 3,000,000 (1,500,000) ( 500,000) ( 125,000) ( 100,000) 775,000

There is definitely no benefit provided to the operating segments from the general corporate expenses. While interest and taxes are often excluded from the measurement of segment profit, the chief operating decision maker has the responsibility to assess the performance of each segment and allocate the appropriate expense. 6 Unadjusted 3rd quarter net income May 2013 realized gain (900,000 / 3) should not be allocated Cumulative effect loss on inventory change in accounting policy Adjusted 3rd quarter net income Warranty expense for 2 quarters cumulative (10% x (10M + 15M)) Less: Warranty in the 1st quarter (5% x 10M) Warranty expense for the 2 nd quarter Total tax expense for 3 quarters ( 17M x 45%) Less: Cumulative tax expense for 2 quarters (13M x 40%) 3rd quarter tax expense 6,000,000 ( 300,000) 500,000 6,200,000

7.

2,500,000 500,000 2,000,000 A 7,650,000 5,200,000 2,450,000 B

8.

5708