MABALACAT CITY COLLEGE ACCOUNTING REVIEW 1

INSTITUTE OF BUSINESS AND EDUCATION Operating Segments

Interim Reporting
Problem 1: Aria Company and its divisions provided the following information for the current year.
Sales to unaffiliated customers P 20,000,000
Intersegment sales of products similar
to those sold to unaffiliated customers 6,000,000
Interest earned on loans to other operating segments 400,000

Aria Company and all its divisions are engaged solely in manufacturing operations.

1. What is the minimum amount of segment revenue in order that a division can be considered a reportable
segment? P 2,600,000

Problem 2: Aroma Company and its divisions are engaged solely in manufacturing operations. The entity reported the
following segment profit (loss) for the current year:

V P 3,400,000
W 1,000,000
X (2,000,000)
Y 400,000
Z (200,000)
Total 2,600,000
1. In segment information for the current year, what are the reportable segments? [V, W , X]

Problem 3: Correy Company and its divisions are engaged solely in manufacturing operations.

The following data pertain to the industries in which operations were conducted for the current year:

Industry Revenue Profit(Loss) Assets

A 10,000,000 (1,750,000) 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 (1,200,000) 12,500,000
D 3,000,000 (550,000) 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000
Total 32,750,000 (1,200,000) 67,500,000
1. How many reportable segments does Correy have? [Five: A,B,C,D,E]

Problem 4: Revlon Company had no intersegment sales and provided the following data for the current year:

 The “others” category includes five operating segments, none of which as revenue or assets greater than P
80,000 and none with an operating profit
 Operating segments 1 and 2 produce very similar products and use very similar production processes, but
serve different customer types and use quite different product distribution system
These differences are due in part to the fact that Segment 2 operates in a regulated environment while
Segment 1 does not.
 Operating segments 6 and 7 have very similar products, production processes, product distributions system,
but are organized as separate divisions since they serve substantially different types of customers.
Neither 6 and 7 operate in a regulated environment.
1

1. What are the reportable segments for the current year? [1,3,4,5, 6+7]
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COMPILED BY: WENSTON DEL ROSARIO ACCTGREV1_008

MABALACAT CITY COLLEGE ACCOUNTING REVIEW 1
INSTITUTE OF BUSINESS AND EDUCATION Operating Segments
Interim Reporting
Problem 5: Wilma Company experienced a P 500,000 decline in market value of inventory at the end of the first
quarter, of which P 200,000 is expected to be temporary.

At the end of the second quarter, the decline in the total amount of writedown was recovered and even exceed by P
100,000.

1. What amount of gain/loss should be reported in the interim statements for 1 st and 2nd Qtrs?
[P 500,000 loss and P 500,000 gain]

Problem 6: Maxine Company provided the following information for the first quarter:

Loss from typhoon P 800,000

Insurance for the calendar year 200,000
Loss on inventory writedown 100,000
Property taxes for the calendar year 500,000
Advertising of a new product 300,000
Depreciation expense for the calendar year 600,000
Year-end bonuses to employees 1,200,000
Ordinary repairs to equipment 150,000
The loss on inventory writedown is expected to be temporary and reversed on the second quarter.
1. What total amount of expenses should be reported in the first quarter? [P 1,975,000]

Problem 7: Brailar Company, a calendar-year entity, reported the following income before income tax and effective tax
rate for the first 3 quarters of the current quarter.
Income before tax Effective tax rate
First Quarter P 6,000,000 30%
Second Quarter 7,000,000 30%
Third Quarter 8,000,000 25%

1. What is the income tax provision for the second quarter? [ P 2,100,000]
2. What is the income tax provision for the third quarter? [P 1,350,000]
3. Assuming that the entity’s reporting period is a fiscal year of Jul 1,2017 to June 30,2018 and that tax rates for
calendar years 2017 and 2018 are 25% and 30% respectively, how much is the tax provision for the third
quarter of FY18? [P 2,400,000]

Problem 8: Hyper Company prepared the following income statement for the year ended Dec 31, 2017:

 Third quarter sales were 30% of total sales; for interim reporting purposes, a gross profit of 40% can be
justified.
 Variable operating expenses are allocated in the same proportion as sales while fixed operating expenses are
allocated based on the expiration of time.
 Of the total operating expenses, P 400,000 relate to variable expenses.
 The equipment was sold on June 1, 2017
 Casualty loss occurred on Sep 1, 2017.
1. What amount should be reported as income before tax for the third quarter ended Sep 30, 2017? [275,000]
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COMPILED BY: WENSTON DEL ROSARIO ACCTGREV1_008