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Free CPA-Financial Exam Braindumps (page: 17)

Page 17 of 41
PDF with 163 Questions

Terra Co.'s total revenues from its three operating segments were as follows:



Which operating segment(s) is (are) deemed to be reportable segments?

  1. None.
  2. Lion only.
  3. Lion and Monk only.
  4. Lion, Monk, and Nevi.

Answer(s): D

Explanation:

Choice "d" is correct. A reportable operating segment is one having 10% of all revenue, including revenue from unaffiliated sales and from intersegment sales:
Lion's revenue percentage is 66.7% [$100,000/150,000].
Monk's revenue percentage is 17.3% [$26,000/150,000].
Nevi's revenue percentage is 16% [$24,000/150,000].
Thus, all three segments meet the 10% of total revenues test and are reportable as operating segments. SFAS 14 para. 10 and 15 as amended by SFAS 131 Choice "a" is incorrect. All segments with revenue percentages exceeding 10% of total revenues are reportable operating segments.
Choice "b" is incorrect. Lion is not the only segment with revenue percentages exceeding 10% of total revenues.
Choice "c" is incorrect. Nevi has a revenue percentage exceeding 10% of total revenues.



What information should a public company present about revenues from its reporting segments?

  1. Disclose separately the amount of sales to unaffiliated customers and the amount of intracompany sales.
  2. Disclose as a combined amount sales to unaffiliated customers and intracompany sales between geographic areas.
  3. Disclose separately the amount of sales to unaffiliated customers but not the amount of intracompany sales between geographic areas.
  4. No disclosure of revenues from foreign operations need be reported.

Answer(s): A

Explanation:

Choice "a" is correct. Unaffiliated customers sales and intracompany sales must be disclosed separately.



Taft Corp. discloses supplemental industry segment information. The following information is available for 1992:



Additional 1992 expenses, not included above, are as follows:
Indirect operating expenses $7,200
General corporate expenses 4,800
Segment C's 1992 operating profit was:

  1. $5,000
  2. $3,200
  3. $2,600
  4. $2,000

Answer(s): A

Explanation:

Choice "a" is correct. $5,000 operating profit for Segment C. Rule: Operating profit by segments is based on the measure of profit reported to the "Chief Operating Decision Maker."
Interest expense, income taxes, and general corporate expenses are not allocated to the divisions solely for the purposes of segment disclosures; they may be allocated if that is how the segments report to the "Chief Operating Decision Maker."



In financial reporting of segment data, which of the following items is always used in determining a segment's operating income?

  1. Income tax expense.
  2. Sales to other segments.
  3. General corporate expense.
  4. Gain or loss on discontinued operations.

Answer(s): B

Explanation:

Choice "b" is correct. Sales to other segments would be used in determining a segment's operating income.
Rule: Equity in net income of another company, general corporate expenses, interest, income tax expense, and gains or losses on discontinued operations are all not included in segment profit unless they are included in the determination of segment profit reported to the "Chief Operating Decision Maker."



Page 17 of 41



Post your Comments and Discuss AICPA CPA-Financial exam with other Community members:

Venkatesh Aiyar commented on September 23, 2024
I will be taking this exam in early December. If anyone has taken or passed this exam recently, please let me know what I should focus on other than the usual suspects such as consolidation, cash flow etc.
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