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Segment and Interim reporting

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Slatter Corp operates primarily in the United States. However, a few years ago, it opened a plan in Spain to produce merchandise to sell there. This foreign operation has been so successful that during the past 24 months the company started a manufacturing plant in Italy and another in Greece. Financial information for each of these facilities follows:

Spain Italy Greece
Sales..........................$395,000 $272,000 $463,000
Intersegment transfers......... 0 0 62,000
Operating expenses..............172,000 206,000 190,000
Interest expense................ 16,000 29,000 19,000
Income taxes.................... 67,000 19,000 34,000
Long-lived assets...............191,000 106,000 72,000

The company's domestic (US) operations reported the following information for the current year:

Sales to unaffiliated customers.............$4,610,000
Intersegment transfers.........................427,000
Operating expenses...........................2,410,000
Interest expense...............................136,000
Income taxes...................................819,000
Long-lived assets.............................1,894,000

Slatter has adopted the following criteria for determining the materiality of an individual foreign country: (1) sales to unaffiliated customers within a country are 10 percent or more of consolidated sales or (2) long-lived assets within a country are 10 percent or more of consolidated long-lived assets.

Apply Slatter's materiality tests to identify the countries to report seperately

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Solution Preview

In order to apply the tests we need the total consolidated sales and consolidated assets
Total consolidated sales are
United States $4,610,000
Spain $395,000
Italy $272,000
Greece $463,000
Total $5,740,000
The percentage of ...

Solution Summary

The solution explains how to apply the tests to determine which segments should be reported separately.

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Segment interim reporting

Ridge company is in the process of determining its reportable segments for the year ended December 31 2012. As the person responsible for determining this information, you gather the following information.

Operating Sales to external Intersegment Sales Segment Segment
Segments Customers and Transfers profit(loss) Assets
A 1000 80 (40) 400
L 400 20 (43) 80
M 320 - 8 160
R 1420 - 16 740
S 160 40 (9) 100
Z 180 120 60 240

a. Using the appropriate tests, determine which of the industry segments listed above are reportable for 2012. Show your supporting computations in good form.

b. Indicate whether or not Ridge 's reportable segments satisfy the 75 percent test. Show computation in good form.

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