Dragon Company has two reportable segments,A and B. Segment A made $3,000,000 of sales to external customers and $200,000 of sales to other operating segments. Segment B made sales of $5,000,000 to external customers and $1,200,000 of sales to other operating segments. Dragon Company reported $9,600,000 of revenues on its consolidated income statement. What calculation below correctly determines whether Dragon Company's reportable segments satisfy the 75% revenue test?
A) $8,000,000/$9,600,000
B) $8,000,000/$11,000,000
C) $9,400,000/$9,600,000
D) $9,400,000/$11,000,000

Question

Quizplus · Accepted Answer

Segment A and B sales to external customers are $3,000,000 and $5,000,000 respectively. So, the total sales to external customers are $8,000,000. The total revenue reported on the consolidated income statement is $9,600,000. So, the percentage of sales to external customers to total revenue is $8,000,000/$9,600,000, which is 83.33%. This satisfies the 75% revenue test.

Dragon Company Has Two Reportable Segments,A and B