Question

Crock Co. had the following revenues and expenses that occurred relating to their operating segments during the year: Sales to unaffiliated customers $2,000,000 Intersegment sales of products $500,000 Interest earned on loans to other segments $50,000 Gain or loss on discontinued operations $70,000 In order to pass the revenue test for qualifying as a reportable segment, a segment’s revenue must exceed $255,000 $262,000 $250,000 $200,000

Answer 1

Answer:

$ 250,000

Step-by-step explanation:

According to GAAP, to pass the revenue test for qualifying as a reportable segment, a segment must have at least 10% of the total revenue generated from all the segments.

"Interest earned on loans" is classified as a part of "Other Income" unless the business primarily generates income from interests, for example, a bank, in such cases, it is part of "Income from Operations".

"Gain or loss on discontinued operations" is a line item that is stated separately below income from continuing operations.

Hence, both of these items are not part of the revenue generated by the segments. So to calculate the total revenue generated by the segments we will only consider the Sales to unaffiliated customers and Intersegment sales of products.

Total Revenue = Sales to unaffiliated customers + Intersegment sales of products

Total Revenue = $2,000,000 +$500,000

Total Revenue = $2,500,000

To pass the revenue test for qualifying as a reportable segment, a segment’s revenue must exceed $250,000 i.e 10% of the total revenue.

$ 2,500,000 × 10% = $ 250,000.