Operating Segments Exercises

Operating Segments

Problem 1

Blue Bay operates in different geographical areas since 2019. The following information pertains to Blue Bay’s operation

for the year 2020.

Geographical Identifiable Revenues Profit

Segment Assets External Internal Total (Loss)

A 1,000,000 2,500,000 500,000 3,000,000 800,000

B 400,000 800,000 200,000 1,000,000 (300,000)

C 500,000 600,000 100,000 700,000 100,000

D 2,000,000 500,000 800,000 1,300,000 (400,000)

E 1,100,000 2,200,000 400,000 2,600,000 1,100,000

Required: What segments are deemed reportable?

Problem 2

The Red Company and its divisions are engaged solely in manufacturing operations. The following data (consistent with

prior years' data) pertain to the industries in which operations were conducted for the year ended December 31, 2020:

Segment Total Revenue Operating Profit Identifiable 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 7,500,000

F 1,500,000 225,000 3,000,000

Required: Determine which of the following company’s operating segments are considered

reportable business segments?

Problem 3

A company operates with five business segments. Its operating profit for a year was 8,000,000 distributed among the five

segments as follows:

Segment Profits Losses

A 1,000,000

B (2,000,000)

C (1,000,000)

D 3,000,000

E 7,000,000

11,000,000 (3,000,000)

Required: Based on operating profit test, which segments are reportable?

Problem 4

Oliver Company has three business segments, each of which was determined to be reportable segment. In 2020, Oliver

Company sales totaled 7,500,000 of which Segment No. 1 contributed 40%. Traceable costs were 1,750,000 for Segment

No. 1 out of a total of 5,000,000 for the whole entity.

For internal reporting, Oliver Company allocates common costs of 1,500,000 based on the ratio of a segment’s profit

before common costs to the total profit before common costs.

Required: How much should Oliver Company report as operating profit for Segment No. 1?

Accountancy and Business Management (ABM001)

Manuel S. Enverga University Foundation Candelaria

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