Question

Cineplex Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2018.

	A	B	C	D	E
Sales revenue	\(40,000	\)75,000	\(580,000	\)35,000	\(55,000
Cost of goods sold	19,000	50,000	270,000	19,000	30,000
Operating expenses	10,000	40,000	235,000	12,000	18,000
Total expenses	29,000	90,000	505,000	31,000	48,000
Operating profit (loss)	\)11,000	\((15,000)	\)75,000	\(4,000	\)7,000
Identifiable assets	\(35,000	\)80,000	\(500,000	\)65,000	\(50,000

Sales of segments B and C included intersegment sales of \)20,000 and $100,000, respectively.

Instructions

(a) Determine which of the segments are reportable based on the:

3) Identifiable assets test.

Short answer

Segments B and C are reportable.

Step-by-step solution

Meaning of Identifiable asset

An identified asset is any asset that has an economic value and may be utilized to generate profits in the future. Simply, identifiable assets are the assets of a corporation whose worth can be assessed. When a firm intends to combine with another company, identifiable assets are crucial.

Determining the segments that are reportable

Identifiable Asset test is $73,000

Working Notes:

$\begin{array}{rcl}\mathrm{Identfiable}\mathrm{asset}\mathrm{test}& =& \mathrm{Total}\mathrm{identifiable}\mathrm{asset}\times \mathrm{rate}\\ & =& \left(\$35,000+\$80,000+\$500,000+\$65,000+\$50,000\right)\times 10\%\\ & =& \$730,000\times 10\%\\ & =& \$73,000\end{array}$

Segment B ($80,000) and C ($500,000) are meet this test