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Chapter 15
SEGMENT AND INTERIM FINANCIAL REPORTING
Answers to Questions
1

An operating segment is a component of an enterprise: (1) that engages in business activities from
which it may earn revenues and incur expenses, either internal or external; (2) whose operating
results are regularly reviewed by the enterprise’s chief operating decision maker and (3) for which
discrete financial information is available.

2

A reportable segment is an operating segment, either single or aggregated, for which information
has to be reported under FASB ASC Topic 280. An operating segment is a reportable segment if
(a) its revenue is 10 percent or more of the combined revenue of all operating segments, (b) its
absolute operating profit or loss is 10 percent or more of the greater of combined operating profit
of all segments that have operating profit or combined operating losses of all segments that have
losses, or (c) its identifiable assets are 10 percent or more of the combined identifiable assets of all
operating segments.

3

Segments not meeting one of these tests are subject to a reevaluation, and possible aggregation, if
the combined revenue from sales to external customers of all reportable segments is less than 75
percent of consolidated revenue. Segments that are not reportable segments are combined with
other business activities and reported under an “all other” category.

4

The 10 percent revenue test applies to the $480,000. Revenue for purposes of FASB ASC Topic
280 includes revenue from both external and intersegment customers.

5

An industry segment is a reportable segment under the 10 percent operating profit test if its
operating profit or loss, in absolute amount, equals or is greater than the greater of combined
operating profits for all operating segments having operating profits or the absolute value of the
combined operating losses for all operating segments having operating losses.

6

A segment is a reportable segment under the 10 percent asset test if its assets are 10 percent or
more of the combined assets of all operating segments. The allocation of general corporate assets
depends on the internal operations of the enterprise. The key is the asset figure given to the chief
operating decision maker on which he or she evaluates performance. If corporate assets are not
allocated, they become part of the reconciliation between the reportable segments’ assets and
consolidated assets.

7

A segment is a reportable segment under the 10 percent revenue test if its intersegment and
external sales is 10 percent or more of the combined intersegment and external sales of all the
operating segments.

8

No. If the combined revenue from sales to external customers is less than 75 percent of total
consolidated revenues, additional operating segments must be identified as reportable segments
until the 75 percent test is met. Either some of the remaining segments must be aggregated, if they

meet the aggregation criteria, so that the combined segment meets the materiality criteria of 10%,
or one or more of the five operating segments that were not reportable segments under the 10
percent tests must be identified as reportable segments.


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15-2

Segment and Interim Financial Reporting

9

The following information must be disclosed for reportable segments and for the remainder of the
enterprise’s operating segments and other business activities in the aggregate:
a
Revenue, with separate amounts to unaffiliated and affiliated customers, and disclosure
of the basis of accounting for intersegment sales.
b
Operating profit or loss, based on the information reviewed by the chief operating
officer.
c
Identifiable assets for each reportable segment.
d
Interest revenue
e
Interest expense
f
Aggregate amount of depreciation, depletion, and amortization expense.
g

Unusual items as described in paragraph 26 of APB Opinion No. 30.
h
Equity in the net income of investees accounted for by the equity method.
i
Income tax expense or benefit.
j
Extraordinary items.
k
Significant noncash items other than depreciation, depletion, and amortization.

10

If the enterprise is segmented on a geographic basis, complete segment information would be
supplied by country of operation. If a different criteria is used for segmentation, more limited
geographic information is supplied. Revenues and long lived assets attributed to the country of
domicile and all foreign operations are disclosed. Any single country with material operations
must also be disclosed separately.

11

The fact of and the amount of revenue from each customer must be disclosed if 10 percent or
more of an enterprise’s revenue is derived from that customer. If 10 percent or more of an
enterprise’s revenue is derived from sales to the federal government, or to a state, local, or foreign
governmental unit, that fact and the amount of revenue must be disclosed. The identity of the
segment making such sales must be disclosed, but the customer need not be identified by name.

12

The requirements of FASB ASC Topic 280 do apply to interim financial statements. Like other
aspects of interim reporting, segment disclosure is more limited in the interim reports than in the

annual reports. Required disclosure for each reportable segment in the interim reports include: (1)
revenues from external customers, (2) intersegment revenues, (3) a measure of segment profit or
loss, (4) total assets for which there has been a material change since the amount disclosed in the
annual report, (5) a description of any changes in the basis for segmentation or the basis of
measurement of segment profit or loss, (6) a reconciliation of total reportable segment profit or
loss and consolidated income before income taxes.

13

An annual effective tax rate is computed as the sum of estimated income taxes for each quarter of
the year, divided by the estimated income for the year. This approach spreads any progression in
tax rates over the entire year in accordance with the integral theory of interim reporting.

14

The discrete theory assumes that each quarter is a separate and independent accounting period that
stands alone. By contrast, the integral theory treats each interim period as an essential part of each
annual period. The integral theory is required under GAAP reporting for interim reports.

15

FASB ASC Topic 270 specifies that minimum disclosures for interim reports should include gross
revenues, provision for income taxes, extraordinary items and cumulative-effect-type changes on
a net-of-tax basis, and net income and related EPS amounts as basic reporting items. In addition,
disclosures are required of seasonal cost and revenue, significant changes in income tax estimates,
or changes in financial position, and material contingencies, extraordinary and unusual or
infrequently occurring items.


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Chapter 15

15-3

SOLUTIONS TO EXERCISES
Solution E15-1
1
2
3

d
a
d

b
d
b

4
5
6

Solution E15-2
1

Revenue tests
10% revenue test:
Concrete and stone products
Construction

Lumber and wood products
Building materials
Other

Revenue from Affiliated
and Unaffiliated Customers
$ 400,000
1,000,000
1,800,000
1,000,000
100,000
$4,300,000

Reportable Segment
Test Value $430,000
No
Yes
Yes
Yes
No

Combined Revenue from
Reportable Segments to
Unaffiliated Customers

Combined Revenue from
All Segments to
Unaffiliated Customers
$
400,000

1,000,000
1,000,000
600,000
100,000
$ 3,100,000

75% revenue test:

Concrete and stone products
Construction
Lumber and wood products
Building materials
Other

$ 1,000,000
1,000,000
600,000
$

2,600,000

Since the $2,600,000 combined revenue from reportable segments to
unaffiliated customers is greater than 75% of $3,100,000 revenue
for all unaffiliated customers, no additional segments have to be
reported.
2

Schedule for disclosing revenue by segment:
Lumber
Construction and Wood

Unaffiliated
sales
Affiliated sales
Total Sales

3

Building

Other

Totals

$1,000,000 $1,000,000 $600,000 $100,000 $2,700,000
1,200,000
$800,000 $400,000
$1,000,000 $1,800,000 $1,000,000 $100,000 $3,900,000

Reconciliation of segment revenue to corporate revenue
Total revenue of reportable segments
Other revenue
Eliminations of intersegment revenue
Total consolidated revenue

$3,900,000
400,000
(1,200,000)
$3,100,000



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Segment and Interim Financial Reporting

15-4

Solution E15-3
Revenue test: 10% of combined revenues (total sales) = $34,400
The food service industry, copper mine, and chemical industry are
reportable segments under the revenue test because they each have
revenue in excess of $34,400.
Operating profit test: 10% of the greater of the combined operating
profit of all industries having operating profit ($44,250) or the
combined operating loss of all industries having operating losses
($12,750).
The food service industry, copper mine, chemical industry, and
agricultural products industry are reportable segments because they each
have operating profit or loss in excess of $4,425.
Asset test: 10% of combined assets ($319,000 total assets less $16,500
corporate assets) = $30,250.
The food service industry and chemical industry are reportable
segments because they have assets in excess of $30,250.
Reportable segments (those that meet at least one of the tests): food
service industry, copper mine, chemical industry, and agricultural
products industry.
Solution E15-4
Wow Corporation
Segment Revenue for 2011
(in thousands)


Sales to unaffiliated customers
Intersegment sales
Total

United
States
$100,000
30,000
$130,000

Canada
$36,000
16,000
$52,000

Other
Foreign
$42,000
8,000
$50,000

Since revenue from reportable operating segments of $136,000 is greater
than 75% of consolidated revenue ($178,000), no additional segments need
be reported.
Revenue Reconciliation:
Reportable Segments
Other segments
Intersegment revenue
Consolidated revenue


$182,000
50,000
(54,000)
$178,000


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Chapter 15

15-5

Solution E15-5
1

[AICPA adapted]

c
Revenue test value = $3,275

Industries A, B, C, and E

Operating profit test value = $580

Industries A, B, C, and E

Identifiable assets test value = $6,750
and E

Industries A, B, C, D,


2

d
Ten percent of combined revenues of all industry segments.

3

b
Revenue test value: 10% of sales to unaffiliated ($4,000) and
affiliated ($1,200) customers = $520

4

b
Only Beck and DG have total revenues  10% of $166,000 combined
revenues:
Beck $24,000 total revenue > $16,600
DG $118,000 total revenue > $16,600

5

d
If sales to a single customer total 10% or more of Gum’s reported
revenues ($50,000,000  10%), major customer data should be
disclosed.

6

a

If revenues generated by foreign operations in one country are
material (10% or more) of consolidated revenue, Gum should report
information about that country’s foreign operations.

7

c
The materiality criteria for reporting a segment based on revenue
is 10 percent of total (both external and intersegment,
eliminating answer b) revenue (not income, eliminating answer a)
of all operating segments (not just those reporting a profit,
eliminating answer d).

8

b
Sales to other segments are always included in segment income. The
other three options generally would not be included but any of
them could be included. Inclusion would depend on whether it was
included in the performance report evaluated by the chief
operating decision maker.


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Segment and Interim Financial Reporting

15-6

Solution E15-6

1

c
Japan is the only foreign segment that has segmental revenues
(including intersegment revenues) of over 10% of total segment
revenues of $63,000.

2

c
United States
Canada
Germany
Japan
Mexico
Other foreign
Total foreign

Assets
$50,000
7,500
8,500
9,000
2,000
1,500
$78,500

>
<
>

>
<

Test Value
$7,850
$7,850
7,850
7,850
7,850

Reportable Geographic Area
yes
no
yes
yes
no

The test value to determine reportability is 10 percent of
consolidated segment assets of $78,500.
3

b
United States on all three tests, Japan on the revenue and asset
tests, and Germany on the operating profit and asset tests.

Solution E15-7
1

d


2

c

3

d
Income year to date
Tax rate
Less: Tax in prior return periods
Quarterly period tax expense

4

1st Quarter
$240,000
34%
81,600
0
$ 81,600

2nd Quarter
$420,000
30%
126,000
81,600
$ 44,400

a
Estimated total taxes of $26,150  $110,000 estimated pretax

income = 23.77%

Solution E15-8
Ent Corporation
Schedule of Income by Quarter for 2011

Income year-to-date
Quarterly period
income
Income tax expense*
Net income
*

1st
Quarter
$30,000

2nd
Quarter
$70,000

3rd
Quarter
$110,000

4th
Quarter
$150,000

Year

2011
$150,000

$30,000
(8,350)
$21,650

$40,000
(11,133)
$28,867

$ 40,000
(11,133)
$ 28,867

$ 40,000
(11,134)
$ 28,866

$150,000
(41,750)
$108,250

Income tax expense computations:
1st
2nd
3rd
4th

Quarter

Quarter
Quarter
Quarter

$30,000  .278333 = $8,350
$70,000  .278333 = $19,483 - $8,350 = $11,133
$110,000  .278333 = $30,616 - $19,483 = $11,133
$150,000  .278333 = $41,750 - $30,616 = $11,134


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Chapter 15

15-7

Solution E15-9 [Based on AICPA]
1

b
The inventory loss was not expected to be temporary, and
therefore, the decline was recognized in the first period. The
subsequent recovery to the original cost is recognized in the
third period.

2

b
The extraordinary loss of $70,000 has to be disclosed, and the
annual insurance premium has to be allocated $25,000 per quarter.


3

d
The full $360,000 loss is included in the second quarter interim
report because the loss is permanent.

4

a
An extraordinary loss is allocated to the quarter to which it
relates. In this case the $300,000 extraordinary loss is assigned
to the third quarter.

5

a
Under the integral theory each quarterly period is an integral
part of each annual period. Thus, property taxes of $20,000
($80,000  25%) and executive bonuses of $80,000 ($320,000  25%)
should be allocated to each of the four quarters.

Solution E15-10
Current cost to replace 4,000 units at $7
Historical cost of inventory liquidated 4,000 units at $5
Adjustment to cost of sales [4,000 units  ($7 - $5)]
Cost of sales
Adjusted cost of sales for the first quarter

$ 28,000

20,000
8,000
550,000
$558,000


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Segment and Interim Financial Reporting

15-8

SOLUTIONS TO PROBLEMS
Solution P15-1
1

Reportable segments under the 10% revenue test:
Test value is 10% of $1,158,000 total sales, or $115,800.
Reportable industry segments include the apparel, furniture,
lumber and wood products, and textiles segments.

2

Test value for 75% revenue test is the combined revenue
from sales to unaffiliated customers by all industry
segments of $892,000  75% =

$669,000

Reportable segments:

Apparel
Furniture
Lumber and wood products
Textiles
Total

$164,000
208,000
175,000
50,000
$597,000

Sales to unaffiliated customers by the reportable industry
segments of $597,000 is less than the $669,000 test value.
Therefore, additional segments must be identified as reportable
segments. The construction industry, as closest to the 10%
criteria, should be included as a reportable segment.
3

Under the assumption that tobacco and paper share the majority of
their operating characteristics they would be combined into one
segment that now meets the 10% test and complies with the 75%
criteria. Construction would no longer need to be reported. Note
to disclose information about segment data:

Apparel
Tobacco and paper
Furniture
Lumber and wood products
Textiles

Other segments
Total revenue

Sales to
Unaffiliated
Customers
$ 164,000
183,000
208,000
175,000
50,000
112,000
$ 892,000

Sales to
Affiliated
Customers
--$

6,000
90,000
170,000
--$266,000

Total Sales
$ 164,000
183,000
214,000
265,000
220,000

112,000
$1,158,000

Reconciliation of Segment Revenue to Consolidated Revenue:
Reportable segment revenue
Other revenue
Intersegment revenue
Consolidated revenue

$1,046,000
112,000
(266,000)
$ 892,000


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Chapter 15

15-9

Solution P15-2
1

Reportable segments
Revenue test ($600,000 + $105,000)  10% = $70,500
Reportable segments:

Food
Chemical

Beverages

$350,000
$150,000
$ 72,000

Operating profit test ($85,000 + $10,000)  10% = $9,500
Reportable segments:
Food
Chemical
Beverages

$ 45,000
$ 23,000
$ 18,000

Asset test $645,000  10% = $64,500
Reportable segments:
2

Food
Chemical

$310,000
$150,000

Reportable segments test
Test value $600,000 consolidated sales  75% = $450,000
Unaffiliated sales:


Food
Chemical
Beverages
Total

Sales by reportable segments ($472,000) are greater than the
$450,000 test value and no additional reportable segments are
required.

$300,000
110,000
62,000
$472,000


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Segment and Interim Financial Reporting

15-10

Solution P15-3
1

Operating segments (foreign geographic areas):
Revenue test

Canada
Mexico
Brazil

South Africa
United States

Revenue
$ 24,000
20,000
22,000
25,000
149,000
$240,000


<
<



Test Value
($240,000  10%)
$24,000
24,000
24,000
24,000
24,000

Reportable
Geographic
Area
yes
no

no
yes
yes


<
<



Test Valuea
($250,000  10%)
$25,000
25,000
25,000
25,000
25,000

Reportable
yes
no
no
yes
yes








Test Valuea
($50,000  10%)
$5,000
5,000
5,000
5,000
5,000

Reportable
yes
yes
yes
yes
yes

Asset test

Canada
Mexico
Brazil
South Africa
United States
a

Assets
$ 30,000
19,000
20,000
31,000

150,000

Total segment assets = $250,000.

Profit test

Canada
Mexico
Brazil
South Africa
United States
a

2

Profit
$ 6,000
8,000
5,000
7,000
24,000

Total segment profits = $50,000.

All five geographic segments (Canada, Mexico, Brazil, South
Africa, and the United States) are reportable segments.


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Chapter 15

15-11

Solution P15-3 (continued)
3

DaP Corporation
Schedule of Operations in Different Geographic Segments
for the year ended December 31, 2011
United
States

Mexico

Brazil

South
Africa

Canada

Total

$120,000

$20,000

$22,000


$15,000

$13,000

$190,000

29,000
$149,000

$20,000

$22,000

10,000
$25,000

11,000
$24,000

50,000
$240,000

Operating profit

$ 24,000

$ 8,000

$ 5,000


$ 7,000

$ 6,000

$ 50,000

Identifiable
assets

$150,000

$19,000

$20,000

$31,000

$30,000

$250,000

Sales to unaffiliated customers
Intersegment
transfers
Total revenue

Reconciliations:
Revenue:
Total revenue of reportable segments
Other revenues

Elimination of intersegment revenues
Total consolidated revenues

$240,000
0
(50,000)
$190,000

Profit or Loss:
Total profit or loss for reportable segments
Other profit or loss
Elimination of intersegment profit and loss
Unallocated amounts
Consolidated income before taxes

$ 50,000
0
0
0
$ 50,000

Assets:
Total assets for reportable segments
Other assets
Consolidated total

$250,000
0
$250,000



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Segment and Interim Financial Reporting

15-12

Solution P15-4
1

Reportable segments:
Revenue test
Sales to Affiliated
and Unaffiliated
Test Value
Customers
Foods
$ 210
<
$240
Soft drinks
1,060
240

Distilled spirits
570
240

Cosmetics
200

<
240
Packaging
120
<
240
Other (4 minor segments)
240
Total revenue
$2,400

Reportable
Segment
no
yes
yes
no
no

75% revenue test

Foods
Soft drinks
Distilled spirits
Cosmetics
Packaging
Other (4 minor segments)

Sales to Unaffiliated Customers
Reportable

All
Segments
Segments
$ 180
$ 900
900
550
550
200
110
240
$1,450
$2,180

Since $1,450 < (75%  $2,180), other reportable segments
must be identified to bring the total revenue from unaffiliated
customers for reportable segments up to $1,635.
If no further aggregation is possible, a logical approach is
to include cosmetics, the next largest segment in terms of sales
to unaffiliated customers.
If further aggregation of some of the otherwise nonreportable segments were possible (they met the majority of the
aggregation criteria), a combined segment may then meet the
reportability criteria and would be reported instead of cosmetics.
The test: $900 + $550 + $200 = $1,650
Since $1,650 > $1,635, the reportable segments are soft
drinks, distilled spirits, and cosmetics.


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Chapter 15

15-13

Solution P15-4 (continued)
2

Mer Corporation
Schedule of Sales to Affiliated and Unaffiliated Customers
by Segments
for the year ended December 31, 2011
Distilled
Spirits

Cosmetics

Other
Segments

Totals

900

$550

$200

$530

$2,180


160

20

40

220

$1,060

$570

$570

$2,400

Soft
Drinks
Sales to unaffiliated
customers
Sales to affiliated
customers
Total revenue

$

$200

Reconciliation:

Revenue from reportable segments
Other revenue
Elimination of intercompany revenue
Consolidated revenue
3

$1,830
570
(220)
$2,180

Mer Corporation
Disclosure of Revenue from Domestic and Foreign Operations
for the year ended December 31, 2011
Sales to unaffiliated customers
Interarea sales
Total revenue

United States
$1,850
200
$2,050

Total Foreign
$330
20
$350

Japan
$250

$250


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Segment and Interim Financial Reporting

15-14

Solution P15-5
1

Reportable segments:
Revenue test

Food
Tobacco
Lumber
Textiles
Furniture

Identified Segment
Revenues
$17,000
17,000
7,000
26,000
7,000
$74,000




<

<

Test Value
$7,400
7,400
7,400
7,400
7,400

Reportable
Segment
yes
yes
no
yes
no



<



Test Value
$1,050
1,050

1,050
1,050
1,050

Reportable
Segment
yes
yes
no
yes
yes



<

<

Test Value
$7,500
7,500
7,500
7,500
7,500

Reportable
Segment
yes
yes
no

yes
no

Operating profit test

Food
Tobacco
Lumber
Textiles
Furniture

Before Tax
Profit
$ 2,000
4,000

Operating
Loss

$(500)
3,000
1,500
$10,500

$(500)

Asset test

Food
Tobacco

Lumber
Textiles
Furniture

Identifiable
Assets
$19,000
21,000
6,000
22,000
7,000
$75,000

2
Food, tobacco, textile, and furniture segments are reportable
segments.


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Chapter 15

15-15

Solution P15-5 (continued)
Sales to Unaffiliated Customers
Reportable
All
Segments
Segments

$12,000
$12,000
10,000
10,000
7,000
18,000
18,000
7,000
7,000
$47,000
$54,000

3
Food
Tobacco
Lumber
Textiles
Furniture

Since the $47,000 revenue from unaffiliated customers of
previously identified reportable operating segments is greater
than 75% consolidated revenue (75%  $54,000 = $40,500), no
additional reportable segments have to be identified.
4
Rad Company
Schedule of Operations in Different Segments
for the year ended December 31, 2011

Revenues
Sales to unaffiliated customers

Sales to affiliated
Customers
Segment revenue
Operating profit
Segment operating
Profit
Assets
Identifiable assets
Depreciation

Food

Tobacco

Textiles

Furniture

Other

Total

$12,000

$10,000

$18,000

$7,000


$7,000

$54,000

5,000
$17,000

7,000
$17,000

8,000
$26,000

$7,000

$7,000

20,000
$74,000

$ 4,000

$ 4,000

$ 5,000

$1,500

$ (500)


$14,000

$18,000
$ 1,000

$19,000
$ 2,000

$22,000
$ 3,000

$7,000
$ 500

$6,000
$2,500

$72,000
$ 9,000

Reconciliation of revenue:
Revenue from reportable segments
Revenue from equity investees
Other revenue
Intersegment eliminations
Consolidated revenue

$ 67,000
9,000
7,000

(20,000)
$ 63,000

Reconciliation of income:
Reportable segment income
Income from equity investees
Other income
Interest expense
Consolidated income before taxes

$ 14,500
9,000
(500)
(7,000)
$ 16,000

Reconciliation of assets:
Reportable segment assets
Other segment assets
Investment in equity affiliates
Corporate assets
Consolidated assets

$ 66,000
6,000
60,000
4,000
$136,000



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Segment and Interim Financial Reporting

15-16

Solution P15-6
Tut Corporation
Schedule of Disclosures for Industry Segments
for the year ended December 31, 2011
Chemical
Segment

Food
Segment

Drug
Segment

Totals

Revenue
Sales to unaffiliated
customers
Intersegment sales
Total sales
Expenses
Cost of sales
General expenses
Selling expenses

Interest expense
Total expenses
Segment operating profit

$125,000
35,000
160,000

$115,000
25,000
140,000

$120,000
120,000

$360,000
60,000
420,000

$ 80,000
15,000
20,000
5,000
120,000
$ 40,000

$ 70,000
10,000
15,000
95,000

$ 45,000

$ 60,000
10,000
15,000
5,000
90,000
$ 30,000

125,000

Assets

$200,000

$180,000

$150,000

$530,000

Reconciliation of revenue:
Revenue from reportable segments
Revenue from equity investees
Interest revenue
Intersegment eliminations
Consolidated revenue
Reconciliation of income:
Reportable segment income
Income from equity investees

Interest income
Corporate expense
Minority interest income
Intersegment eliminations
Consolidated income before taxes
Reconciliation of assets:
Reportable segment assets
Investment in equity affiliates
Corporate assets
Elimination of intersegment balances
Consolidated assets

$

$

420,000
30,000
10,000
(60,000)
400,000

$

115,000
30,000
10,000
(5,000)
(15,000)
(30,000)


$

105,000

$

530,000
300,000
200,000
(30,000)
$1,000,000


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Chapter 15

15-17

Solution P15-7
1

Reportable segments
Revenue test

Segment
Food
Packing
Textile

All other

Industry Segment
Revenue
$1,010,000
560,000
330,000
400,000
$2,300,000





Test Value
(10%  $2,300,000)
$230,000
230,000
230,000



<

Test Value
(10%  $300,000)
$30,000
30,000
30,000






Segment
Test Value
(10%  $2,000,000)
$200,000
200,000
200,000

Operating
Reportable
Segment
yes
yes
yes

Operating profit test
Segment
Food
Packing
Textile
All other

Operating
Profit
$110,000
110,000
5,000

75,000
$300,000

Reportable
Segment
Yes
Yes
No

Asset test

Segment
Food
Packing
Textile
All other

Operating
Assets
$

750,000
500,000
350,000
400,000
$2,000,000

Reportable
Segment
Yes

Yes
Yes


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Segment and Interim Financial Reporting

15-18

Solution P15-7 (continued)
2

Cob Company
Operations in Different Segments
at or for the year ended December 31, 2011
(Data in Thousands of Dollars)
Food
Industry

Packing
Industry

Textile
Segments

Foreign
Operation

All

Other

Totals

950

$500

$300

$250

$400

$2,400

Revenues
Sales to unaffiliated customers
Intersegment sales
at market

$

60

60

30

50


Total Segment Sales

$1,010

$560

$330

$300

$400

Operating profit
Segment operating
Profit

$

110

$110

$

5

$ 25

$ 75


Income before taxes

$

110

$110

$

5

$ 25

$ 75

$

Assets
Identifiable assets

$

700

$500

$325


$200

$400

$2,125

Reconciliation of revenue:
Revenue from reportable segments
Other segment revenue
Intersegment eliminations
Income from equity investees
Consolidated revenue

200
$2,600

$2,200
400
(200)
100
$2,500

Reconciliation of income:
Reportable segment income
Other segment income
Income from equity investees
Interest expense
Corporate expense
Consolidated income before taxes


$

Reconciliation of assets:
Reportable segment assets
Other segment assets
Investment in equity affiliates
Corporate assets
Consolidated assets

$1,725
400
1,000
50
$3,175

$

250
75
100
(20)
(25)
380

325


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Chapter 15


15-19

Solution P15-8
Tor Corporation
Schedule of Income by Quarter for 2011
1

First $50,000  20%
Remainder ($160,000 – 50,000)  34%
Less amount subject to dividends received deduction
($20,000  80%  34%)

$ 10,000
37,400

Total tax for the year
Total Income
Effective tax rate

$ 41,960
$160,000
26.225%

2
Income year-to-date
Quarterly period
income
Income tax expense*
Net income

*

(5,440)

1st
Quarter
$20,000

2nd
Quarter
$50,000

3rd
Quarter
$110,000

4th
Quarter
$160,000

$20,000
(5,245)
$14,755

$30,000
(7,868)
$22,132

$ 60,000 $ 50,000 $160,000
(15,734) (13,113) (41,960)

$ 44,266 $ 36,887 $118,040

Income tax expense computations:
1st
2nd
3rd
4th

Quarter
Quarter
Quarter
Quarter

$20,000  .26225 = $5,245
$50,000  .26225 = $13,113 - $5,245 = $7,868
$110,000  .26225 = $28,847 - $13,113 = $15,734
$160,000  .26225 = $41,960 - $28,847 = $13,113

Year
2011
$160,000