Question

Ecru Company has identified five industry segments: plastics, metals, lumber, paper, and finance.

It appropriately consolidated each of these segments in producing its annual financial statements. Information describing each segment (in thousands) follows:

	Plastics				Metals				Lumber				Paper				Finance
Sales to outside parties	$	6,415			$	2,194			$	656			$	367			$	0
Intersegment transfers		118				141				106				118				0
Interest income from outside parties		0				23				10				0				31
Interest income from intersegment loans		0				0				0				0				169
Operating expenses		3,994				1,652				956				599				20
Interest expense		65				20				55				29				91
Tangible assets		1,340				3,036				364				611				124
Intangible assets		76				371				0				52				0
Intersegment loans (debt)		0				0				0				0				674

Ecru does not allocate its $1,270,000 in common expenses to the various segments.

Perform testing procedures to determine Ecru’s reportable operating segments.

1. Revenue test:

2. Profit or loss test:

3. Asset test:

Answer 1

Revenue Test
Segment	Revenue( Outside _ Intersegment)	Percentage( Round off to 1 digit)	Reported or not	Reason
Plastic	6297	68.8	Reportable	more than 10%
Metals	2053	22.4	Reportable	more than 10%
Lumber	550	6	Non reportable	less than 10%
Paper	249	2.8	Non reportable	less than 10%
Finance	0	0	Non reportable	less than 10%
	9149	100
Profit or loss test
Segment	Revenue	Exp( Operating + Interest exp)	Profit	Loss	Reported or not	Reason
Plastic	6297	4059	2238		Reportable	More than 261.9
Metals	2053	1672	381		Reportable	More than 261.9
Lumber	550	1011		461	Reportable	More than 261.9
Paper	249	628		379	Reportable	More than 261.9
Finance	0	111		111	Non reportable	Less than 261.9
	9149	7481	2619	951
Note:-
Since, 2619 is greater than 951. Therefore, we will use 2619 as base
10* of 2619=	261.9
Asset test
Segment	Assets ( Tangible Plus Intangible)	Percentage( Round off to 1 digit)	Reported or not	Reason
Plastic	1416	23.7	Reportable	more than 10%
Metals	3407	57	Reportable	more than 10%
Lumber	364	6.1	Non reportable	less than 10%
Paper	663	11.1	Reportable	more than 10%
Finance	124	2.1	Non reportable	less than 10%
	5974	100
The plastics, metals, paper, and Lumber segments meet at least one of the three tests and therefore are reportable

I hope this satisfies the answer.

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