Question 1

A company reports the following for its operating segments:
- Segment A: Revenue $400, Profit $50, Assets $1,000
- Segment B: Revenue $100, Loss ($30), Assets $200
- Segment C: Revenue $50, Profit $5, Assets $100
- Segment D: Revenue $40, Loss ($40), Assets $50

Total Revenue = $590. Total Assets = $1,350.
Which segments are reportable based on the quantitative thresholds?

Accepted Answer

Apply 10% tests: 1. Revenue (Internal + External). 2. Profit/Loss (compare absolute profit sum vs absolute loss sum, take 10% of the larger). 3. Assets. If a segment meets ANY of the three, it is reportable.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using the net profit of the whole company as the base for the profit test; ignoring the loss segments.

How to approach this question

Full Answer

Common mistakes

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