Question

Pastel Company operates in the following lines of business which management believes have distinguishable return and risk characteristics: Revenues Assets Food 500 2,000 Beverages 1,300 6,000 Entertainment 2,500 10,000 Lodging 5,000 20,000 Services 22,000 28,000 International 700 3,000 Totals 32,000 69,000 For which of these lines is Pastel required to report segment data? A) Entertainment, Lodging, and Services. B) International only. C) Services and International.

Answer 1

Answer:

A) Entertainment, Lodging, and Services

Explanation:

Under Generally Accepted Accounting Principles (GAAP), you need to follow these rules to report segment data:

• If at least 10% of revenues, profit or combined assets are under one segment.
• And together with the above the total revenue must overcome the 75% of the entity.

                         Revenues Assets Rev/Assets

Food                        500          2.000   3%

Beverages               1.300   6.000    9%

Entertainment      2.500  10.000    14%

Lodging                       5.000  20.000    29%

Services                      22.000   28.000    41%

International                700             3.000     4%

                            32.000 69.000 100%

A) Entertainment, Lodging, and Services

• Revenues 92% of total entity.
• Assets 84% of total entity.