Solution E14-5

[AICPA adapted]

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

Industries A, B, C, D, and E

Sigma sales (40% of total sales)

Less: Traceable costs
Common costs ($100,000 x 40%)

$600,000
40,000

Operating income of Sigma

23

$1,000,000
640,000
$

360,000

Ten percent of combined revenues of all industry segments.

34

Revenue test value: 10% of sales to unaffiliated ($2,000) and affiliated

($600) customers = $260
45

Only Bix and Dil have total revenues 10% of $83,000 combined revenues:
Bix
Dil

$12,000 total revenue > $8,300

$59,000 total revenue > $8,300

56

If sales to a single customer total 10% or more of Grum's reported

revenues ($50,000,000 x 10%), major customer data should be
disclosed.

67

If revenues generated by foreign operations in one country are

material (10% or more) of consolidated revenue, Grum should report
information about that countrys domestic and foreign operations.

The materiality criteria for reporting a segment based on revnue

is 10 percent of total (both external and intersegment,
eliminating b) revenue (not income eliminating a) of all operating
segments (not just those reporting a profit, eliminating d).

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.

Solution E14-68

Revenue generated by foreign operations to unaffiliated customers

is divided by consolidated revenue as reported in the enterprise's
income statement.

12

cb

Japan is the only foreign segment that has segmental revenues

(including intersegment revenues) of over 10% of total segment
revenues of $126,000.Canada is the only foreign geographic area
that has revenue from unaffiliated customers in excess of $10,000
[10% x $100,000].

23

ca
Geographic

noyes
yesno

Reportable

Identifiable
Assets

United States
Canada
Germany
Japan

Mexico

$100,000
$15,000
17,000

<
<
<

18,000

<

$157,000

4,000
Other foreign

no
Total foreign

Test Value

Area

$15,700
$15,70020,000
15,70020,000

yes

no

15,70020,000
<
15,70020,000
3,000
20,000

yes

The test value to determine reportability is 10 percent of consolidated

segment assets of $157,000, not total consolidated assets.as shown in
the enterprise's balance sheet.
34

bd

United States on all three tests, Japan on the revenue and asset
tests, and Germany on the operating profit and asset tests.
(because domestic operations must be disclosed) and Canada (from
revenue test).

Solution E14-79
1

Income year to date

Tax rate
Less: Tax in prior return periods
Quarterly period tax expense
4

1st Quarter
$120,000
34%
40,800
0
$ 40,800

2nd Quarter
$210,000
30%
63,000
40,800
$ 22,200

Estimated total taxes of $26,150 $110,000 estimated pretax income = 23.77%

Solution E14-911

[AICPA adapted]

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.

The extraordinary loss of $70,000 has to be disclosed, and the

annual insurance premium has to be allocated $25,000 per quarter.

The full $360,000 loss is included in the second quarter interim

report because the loss is permanent.

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.

Under the integral theory each quarterly period is an integral part

of each annual period. Thus, property taxes of $20,000 ($80,000 x
25%) and executive bonuses of $80,000 ($320,000 x 25%) should be
allocated to each of the four quarters.

Solution E14-102
Current cost to replace 4,000 units at $8
Historical cost of inventory liquidated 4,000 units at $5
Adjustment to cost of sales [4,000 units x ($8 - $5)]
Cost of sales
Adjusted cost of sales for the first quarter

$ 32,000
20,000
12,000
550,000
$562,000