FAR EASTERN UNIVERSITY

Institute of Accounts, Business and Finance (IABF)

Accountancy and Internal Auditing Department
FIN ACT 3 - Financial Accounting & Reporting, Part III
Quiz – Operating Segments

Name: ________________________________________________Yr. and Section: ________________

Instructions: Provide the following required in the worksheet. Strictly no erasures in this test questionnaire
and in the worksheet. Show the computations in good form.

1. Perry Company and its divisions are engaged solely in manufacturing operations. The following
data (consistent with prior year’s data) pertain to the industries in which operations were
conducted for the current year ended December 31:

Total Operating Identifiable

Industry revenue profit assets
A 10,000,000 1,750,000 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 _ 225,000 _ 3,000,000
32,750,000 5,800,000 67,500,000

In its segment information for the current year, how many reportable segments does Perry have?
____________________

2. Ali Company and its divisions are engaged solely in manufacturing. The following data pertain to
the industries in which operations were conducted for the current year:
Segment profit (loss)
3,400,000
V 1,000,000
W (2,000,000)
X 400,000
Y (200,000)
Z 2,600,000

In the segment information for the current year, what are the reportable segments? ______________

3. Nathan Company, an entity listed on a recognized stock exchange, reports operating results from
its Japan division to its chief operating decision maker. The segment information for the current
year is as follows:

Revenue 3,675,000
Profit 970,000
Assets 1,700,000
Number of employees 2,500

Nathan’s results for all of its operating segments in total are:

Revenue 39,250,000
Profit 9,600,000
Assets 17,500,000
Number of employees 18,500

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 Which piece of information determines for Nathan that the Japan division is a reportable
operating segment? _____________________________

4. The following information pertains to Arean Company and its divisions for the current year:

Sales to unaffiliated customers 20,000,000

Intersegment sales of products similar to those
sold to unaffiliated customers 6,000,000
Interest earned on loans to other operating segments 400,000

Aria and all of its divisions are engaged solely in manufacturing operations.

What is the minimum amount of segment revenue in order that a division can be considered a
reportable segment? ____________________________________

5. The following information pertains to revenue earned by Sitti Company’s operating segments for
the current year:

Sales to
unaffiliated Intersegment Total
Segment customers sales revenue

Albert 5,000 3,000 8,000

Betty 8,000 4,000 12,000
Cidee 4,000 - 4,000
Dindy 43,000 16,000 59,000
Combined 60,000 23,000 83,000
Elimination - (23,000) (23,000)
Consolidated 60,000 - 60,000

In conformity with the revenue test, what is the total revenue of the reportable segments?
_______________________

Gibbs Company, a publicly owned entity, is subject to the requirements of PFRS 8. In its income
statement for the year ended December 31, 2011, Gibbs reported revenue of P50,000,000,
excluding intersegment sales of P10,000,000, expenses of P47,000,000 and net income of
P3,000,000. Expenses include payroll costs of P15,000,000. Gibbs’s combined identifiable assets
of all operating segments on December 31, 2011 totaled P40,000,000.

6. In its financial statements, Gibbs should disclose major customer data if sales to any single
customer amount to at least _____________________________

7. External revenue of reportable operating segments must be at least _____________________

8. Josef Company discloses supplemental operating segment information. The following information
is available for the current year:

Segment Sales Traceable expenses

X 5,000,000 3,000,000
Y 4,000,000 2,500,000
Z 3,000,000 1,500,000
12,000,000 7,000,000

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Additional expenses, not included above, are as follows:

Indirect expenses 1,800,000

General corporate expenses 1,200,000
Interest expense 600,000
Income tax expense 400,000

The interest expense and income tax expense are regularly reviewed by the chief operating decision
maker as a measure of profit or loss. Appropriate common expenses are allocated to segments based on
the ratio of a segment’s sales to total assets. What is Segment Z’s profit for the current year?
___________________

9. Clarence Company has three lines of business, each of which was determined to be reportable
segment. Clarence Company sales aggregated P7,500,000 in the current year, of which Segment
No. 1 contributed 40%. Traceable costs were P1,750,000 for Segment No. 1 out of a total of
P5,000,000 for the entity as whole. For external reporting, Clarence allocates common costs of
P1,500,000 based on the ratio of a segment’s income before common costs to the total income
before common costs.

In its financial statements for the current year, what amount should Clarence report as profit for
Segment No. 1? ______________________________

10. Cell Company has four manufacturing divisions, each of which has been determined to be a
reportable segment. Common costs are appropriately allocated on the basis of each division’s
sales in relation to Cell’s aggregate sales. Cell’s Dell division accounted for 40% of Cell’s total
sales in the current year. For the current year ended December 31, Dell had sales of P8,000,000
and traceable costs of P4,800,00. In the current year, Cell incurred costs of P800,000 that were
not directly traceable to any of the divisions. In addition, the Dell division incurred interest
expense of P640,000.

It is an entity policy that interest expense is included in the measure of profit or loss that is
reviewed by the chief operating decision maker.

In reporting supplementary segment information, what amount should be disclosed as Dell’s profit
for the current year? ____________________________

11. Timmy Company, a publicly owned entity, assesses performance and makes operating decisions
using the following information for its reportable segments:

Total revenue 7,680,000

Total profit and loss 406,000

The total profit and loss included intersegment profit of P61,000. In addition, Timmy has P5,000
of common costs for its reportable segments that are not allocated in reports reviewed by the
chief operating decision maker.

What amount should Timmy report as segment profit? _________________________

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 12. Bird Company operates in several different industries. Total sales for Bird Company totaled
P14,000,000, and total common costs amounted to P6,500,00 for the current year. For internal
reporting purposes, Bird Company allocates common costs based on the ratio of a segment’s
sales to total sales. Additional information regarding the different segments follows:

Contribution to total sales Costs specific to the

segment
Segment 1 25%
2 12% 1,100,000
3 31% 1,000,000
4 23% 1,300,000
5 9% 880,000
400,000
What is the profit of Segment 1? ___________________________

13. Coala Company does business in several different industries. The income statement for 2011 is
as follows:

Sales 60,000,000
Cost of goods sold (28,000,000)
Gross income 32,000,000
Expenses (14,000,000)
Depreciation (4,000,000)
Income tax expense (4,000,000)
Net income 10,000,000

Coala has two major reportable segments, X and Y. An analysis reveals that P1,000,000 of the
total depreciation expense and P2,000,000 of the expenses are related to general corporate
activities. The remaining expenses and sales are directly allocable to segment activities
according to the following percentages:

Segment X Segment Y Others

Sales 40% 45% 15%

Cost of goods sold 35 50 15
Expenses 40 40 20
Depreciation 40 45 15

What amount should Coala Company disclose as profit of Segment X? ___________________________

14. Receive Company has expanded rapidly and segment reporting is now required. The entity has
no intersegment sales. The following data are for the year ended December 31, 2011:

Operating Segment Operating Identifiable

segment revenue profit assets

1 620,000 200,000 400,000

2 100,000 20,000 80,000
3 340,000 70,000 300,000
4 190,000 (30,000) 140,000
5 180,000 (25,000) 180,000
6 70,000 10,000 120,000
7 120,000 (20,000) 140,000
Others 380,000 (25,000) 140,000

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* The “others” category includes five operating segments, none of which has revenue or assets greater
than 80,000 and none with an operating profit.

* Operating Segments 1 and 2 produce very similar products and use very similar production processes,
but serve different customer types and use quite different product distribution system. These
differences are due in part to the fact that Segment system. These differences are due in part to the
fact that Segment 2 operates in a regulated environment while Segment 1 does not.

* Operating Segments 6 and 7 have very similar products, production processes, product distribution
systems, but are organized as separate divisions since they serve substantially different types of
customers. Neither Segments 6 nor 7 operate in a regulated environment.

What are the reportable segments for the year ended December 31, 2011?
________________________________________

“That in all things, GOD maybe glorified”

“Salvation is found in Christ alone, for there is no other name given under heaven, by which man might be
saved. Believe in Christ, and you will be saved, you and your entire household” Acts 4:12; 16:31

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John 3:27