Operand Corporation reported consolidated revenues of $30,000,000 on its income statement for 20X4.The management of the corporation identified three industry segments,X,Y,and Z.These segments had the following intersegment sales and transfers during 20X4:

For Operand Corporation,the revenue test would be satisfied if any of its industry segments had revenue equal to or greater than which of the following?
A) $2,450,000
B) $3,000,000
C) $3,550,000
D) $5,500,000

Question

Operand Corporation reported consolidated revenues of $30,000,000 on its income statement for 20X4.The management of the corporation identified three industry segments,X,Y,and Z.These segments had the following intersegment sales and transfers during 20X4:

For Operand Corporation,the revenue test would be satisfied if any of its industry segments had revenue equal to or greater than which of the following?

For Operand Corporation,the revenue test would be satisfied if any of its industry segments had revenue equal to or greater than which of the following?
A) $2,450,000 
B) $3,000,000 
C) $3,550,000 
D) $5,500,000

Quizplus · Accepted Answer

According to the revenue test in ASC 280, if the combined external revenue of all industry segments is less than 75% of total consolidated revenues, the company must report certain segment information. In this case, the intersegment sales and transfers between the three segments amount to $6,000,000 ($3,000,000 + $2,000,000 + $1,000,000). Therefore, the combined external revenue of all industry segments is $24,000,000 ($30,000,000 - $6,000,000), which is less than 75% of total consolidated revenues. To satisfy the revenue test, any one of the industry segments must have external revenue equal to or greater than $3,550,000 ($24,000,000 × 0.148) which is the smallest of the answer choices. Therefore, the best choice is C.

Operand Corporation Reported Consolidated Revenues of $30,000,000 on Its Income