CHAPTER

50 9
INTERIM REPORTING AND OPERATING SEGMENTS

9-1. Angel Company

Angel Company
Statement of Comprehensive Income
For the Quarter Ended September 30, 2017

Net sales (30% x 9,000,000) P 2,700,000

Cost of goods sold 1,620,000
Gross profit (40% x 2,700,000) P 1,080,000
Operating expenses * (255,000)
Gain on sale of equipment 100,000
Profit from Continuing Operations P 925,000
Income Tax (277,500)
Net profit (loss) P 647,500

*Operating Expenses:
Variable = 30% x 600,000 P180,000
Fixed = (900,000 – 600,000) /4 75,000
Total P255,000

9-2. ABC Corporation

P30 million x 12% P3,600,000

P25 million x 4% 1,000,000
Commission expense for the second quarter P4,600,000

9-3. Galaxy Company

Galaxy Company
Statement of Comprehensive Income
For the Month of October 2017
Net sales P 239,100
Cost of goods sold:
Merchandise Inventory, October 1 P 280,000
Purchases 215,000
Total goods available for sale 495,000
Merchandise inventory, October 31 372,600
Cost of sales P 122,400
Gross profit P 116,700
Selling expenses (54,700)
General and administrative expenses (19,000)
Net profit P 43,000

9-4. Red Company

Minimum required revenues P3,275,000

Minimum required operating profit 580,000
Minimum required identifiable assets 6,800,000
Identified reportable segments, based on any of the above tests: A, B, C, D and E

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Chapter 9 – Interim Reporting and Operating Segments

9-5. Blue Bay

Minimum required assets (10% x P50M) P5,000,000

Minimum required revenue (20% x P86M) 8,600,000
Minimum required operating result (10% x P20M) 2,000,000

Reportable segments are A, B, C, D and E. The 75% test has also been met.

9-6. Minimum operating result (profit or loss) P1,100,000

Reportable segments based on the above test are B, D and E.

9-7. Oliver Company

Revenue (40% x 7,500,000) P3,000,000

Traceable costs (1,750,000)
Allocated common costs (1,250,000/2,500,000) x 1,500,000) ( 750,000)
Profit – Segment 1 P 500,000

9-8. Ebony Company

Sales P4,000,000
Traceable cost P2,200,000
Allocated common costs:
1,800,000 x (1,800/3,000) 1,080,000 3,280,000
Operating profit – Segment 1 P 720,000

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Chapter 9 – Interim Reporting and Operating Segments

MULTIPLE CHOICE QUESTIONS

Interim Reporting

MC1 A
MC2 B
MC3 D
MC4 B
MC5 B
MC6 B
MC7 B
MC8 C
MC9 C
MC10 A
MC11 D
MC12 C
MC13 C 300,000 x ¼ = 75,000
MC14 B 240,000/4 = 60,000; 600,000 + 60,000 = 660,000
MC15 A End of January = 200,000 + 50,000 – 192,000 = 58,000
End of February = 58,000 + 380,000 – 408,000 = 30,000
End of March = 30,000 + 704,000 – 604,000 = 130,000
MC16 C (600,000 x ½) + (1,500,000 x ½) = 1,050,000
MC17 A Entire amount of P60,000 loss is recognized in the quarter incurred.
MC18 D P2M advertising and P7M staff bonuses
MC19 A (25,000,000 X 10%) – (10,000,000 X 5%) = 2,000,000
MC20 A 100,000 x 12 = 1,200,000, which is lower than the cost of P1,400,000

Operating Segments

MC21 A
MC22 C
MC23 C
MC24 B
MC25 C
MC26 C Should be 75% of total external revenue
MC27 B
MC28 D
MC29 A
MC30 B
MC31 C 10% (1,000,000 + 300,000) = 130,000
MC32 D 500,000 – 225,000 – (240,000 x 500,000/1,500,000) = 195,000
MC33 A 2,000,000 – 900,000 – (3,000,000 x 2M/10M) = 500,000
MC34 A 10% x 25M = 2,500,000; (10M+6M+9M = 25M)
MC35 C Assets
MC36 D A, D, and E
MC37 D
MC38 C

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