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AICPA CPA-Financial Exam - Topic 1 Question 74 Discussion

Posted by Felicidad on Sep 02, 2023 at 05:10 PM

Grum Corp., a publicly-owned corporation, is subject to the requirements for segment reporting. In its income statement for the year ended December 31, 1991, Grum reported revenues of $50,000,000, operating expenses of $47,000,000, and net income of $3,000,000. Operating expenses include payroll costs of $ 15,000,000. Grum's combined identifiable assets of all industry segments at December 31, 1991, were $40,000,000.

Cott Co.'s four business segments have revenues and identifiable assets expressed as percentages of Cott's total revenues and total assets as follows:

Which of these business segments are deemed to be reportable segments?

Suggested Answer: D

Rule: A segment must be at least 10% of:

1. Combined revenues (whether intersegment or unaffiliated customers), or

2. Operating income (of all segments not having an operating loss), or

3. Identifiable assets.

Choice 'd' is correct. Ebon, Fair, Gel, and Hak, since all four companies meet at least one of the criteria.


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13 comments · newest first
LO
Lorrine 11 months ago
Ebon and Fair are obvious, but Gel's numbers are close!
MI
Micheal 11 months ago
Fair and Gel look strong, but Hak? Not so sure.
AL
Alesia 11 months ago
Wait, what about Hak? Seems like it should count too.
WH
Whitney 11 months ago
Totally agree, Ebon is definitely reportable!
RO
Rosina 12 months ago
Ebon has the highest revenue percentage.
RA
Rana 12 months ago
I think all four segments could potentially be reportable, but I need to double-check the percentages. I remember something about needing to combine them to see if they hit the thresholds.
YE
Yen 12 months ago
I’m a bit confused about the criteria for reportable segments. I thought it was based on both revenue and assets, but I’m not sure how to apply that here.
BA
Barbra 1 year ago
This question feels familiar! I practiced one similar where we had to analyze segment revenues. I think Ebon and Fair might be the right answer, but I can't recall the exact percentages.
DI
Dick 1 year ago
I remember that reportable segments need to meet certain thresholds, like 10% of revenue or assets. I think Ebon definitely qualifies, but I'm unsure about the others.
RE
Refugia 1 year ago
Okay, I got this. The reliability of a series system is the product of the individual reliabilities. Since each component has a reliability of 0.98, the overall system reliability will be 0.98 * 0.98 * 0.98 = 0.94.
JO
Joni 1 year ago
This seems like a straightforward question about strategic decision-making. I think the key is to identify the approach Ben is likely to take based on the information provided.
LA
Lasandra 1 year ago
The domain mode is an interesting detail. I wonder if that's a critical factor in determining the right approach. I'll need to think through the implications of development mode versus production mode.
PA
Pamella 1 year ago
I'm a bit unsure about this one. I'm torn between options A and C. I know a read-only replica can be used for reporting, but I'm also wondering if it could be used for high availability in a regional outage. I'll have to think this through carefully.
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