OPERATING SEGMENT AND PRACTICAL ACCOUNTING I

INTERIM REPORTING

1. Nancy Company identified the following segments for the current year:

Segment Total Revenue Profit (Loss) Assets

A 2,800,000 300,000 9,000,000
B 6,000,000 (600,000) 8,000,000
C 2,300,000 60,000 6,500,000
D 900,000 40,000 2,500,000

What are the reportable operating segments?

a. Segments A, B, C and D
b. Segments A, B and C
c. Segments A and B
d. Segments A, C and D

2. Gina Company, a publicly owned entity, is subject to the requirements for segment
reporting. In its income statement for the year ended December 31, 2012, the entity
reported revenue of P50,000,000, excluding intersegment sales of P10,000,000,
expenses of P47,000,000 and net income of P3,000,000. Expenses include payroll costs
of P15,000,000. The combined assets of all segments on December 31, 2012 totaled
P45,000,000.

1. What is the minimum amount of sales to a major customer?

a. 5,000,000
b. 4,000,000
c. 4,500,000
d. 6,000,000

2. What is the minimum amount of external revenue to be disclosed by reportable

segments?
a. 30,000,000
b. 45,000,000
c. 33,750,000
d. 37,500,000

3. The following information pertains to Dominique Company and its divisions for the
current year:
Sales to unaffiliated customers 40,000,000
Intersegment sales of products similar to those
sold to unaffiliated customers 10,000,000
Interest earned on loans to other operating segments 4,000,000

The entity and all of its divisions are engaged solely in manufacturing operations. What
is the minimum amount of revenue of a segment to be classified as reportable segment?
a. 5,400,000
b. 4,000,000
c. 5,000,000
d. 4,400,000

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 4. Boni Company experienced a P500,000 decline in the market value of its inventory at
the end of the first quarter. The entity had expected this decline to reverse in the second
quarter, and in fact, the second quarter recovery exceeded the previous decline by
P100,000. What amount of gain or loss should be reported in the interim statements for
the first and second quarters?

First quarter Second quarter

a. 500,000 loss 500,000 loss
b. 500,000 loss 600,000 gain
c. 500,000 loss 100,000 gain
d. 0 0

5. Richie Company discloses supplemental operating segment information. The following

information is available for the current year:
Segment Sales Traceable expenses
Aye 5,000,000 3,000,000
Bee 4,000,000 2,500,000
Cee 3,000,000 1,500,000

Additional expenses are P2,000,000 indirect expenses, P1,000,000 general corporate

expenses, P500,000 interest expense and P400,000 income tax expense. The interest
expense and income tax expense are regularly reviewed by the chief operating decision
maker as a measure of profit or loss. Appropriate common expenses are allocated to
segments based on the ratio of a segment’s sales to total sales. What is the profit of
Segment Cee for the current year?
a. 775,000
b. 525,000
c. 875,000
d. 900,000

6. Jejomar Company’s P6,000,000 net income for the quarter ended September 30, 2012,
included the following after-tax items:

A P900,000 gain realized in May 2012 was allocated equally to the second, third and
fourth quarters of 2012.

A P500,000 cumulative effect loss resulting from a change in inventory valuation

method was recognized on August 31, 2012.

In addition, the entity paid P200,000 on February 1, 2012, for 2012 calendar-year real
property tax. Of this amount, P50,000 was allocated to the third quarter of 2012.

What is the net income for the quarter ended September 30, 2012?
a. 6,200,000
b. 6,500,000
c. 6,150,000
d. 5,700,000

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 7. Sherrie Company prepares quarterly interim financial reports. The entity sells electrical
goods, and normally 5% of customers claim on their warranty. The provision in the first
quarter was calculated as 5% of sales to date, which was P10,000,000. However, in the
second quarter, a design fault was found and warranty claims were expected to be 10%
for the whole year. Sales in the second quarter were P15,000,000. What would be the
provision charged in the second quarter’s interim financial statements?
a. 2,000,000
b. 1,250,000
c. 1,500,000
d. 750,000

8. Ailynn Company, a calendar-year corporation, has the following income before tax
provision and estimated effective annual tax rates for the first three quarters of 2012:
Quarter Income before income tax Effective annual tax rate

First 6,000,000 40%

Second 7,000,000 40%
Third 4,000,000 45%

What is the income tax provision in the interim income statement for the third quarter?
a. 1,800,000
b. 2,450,000
c. 2,550,000
d. 7,650,000

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