Multiplex Inc a public company whose stock is traded on a na

Multiplex Inc, a public company whose stock is traded on a national stock exchange, reported the following information on its consolidated financial statements for 20X5: From the consolidated income statement Sales revenues Rental revenues Income before income taxes Income taxes $670,000,000 59,000,000 70,000,000 25,000,000 From the consolidated balance sheet: Total assets $716,000,000 Multiplex management determined that it had the following operating segments during 20x5: (1) car rental, (2) aerospace, (3) communications, (4) health and fitness products, and (5) heavy equipment manufacturing. The company assembled the following information for these industry segments for 20x5 (dollar amounts stated in millions): Car Health/ Heavy Item Sales Rentals Intersegment sales Cost of goods sold Selling expenses Other traceable expenses Allocation of common costs Assets Other information: nications Fitness s 50 ipment $255 $ 60 $300 $64 15 133 92 13 12 157 50 182 87 30 12 246 21 14 16 10 70 120 130 Depreciation expense (included above) 65 80 10 65 75 90 Capital expenditures

Solution

a. Schedule for 10% revenue test: Segment Segment Revenue Percent of combined revenue Reportable Segment (>10%) Car rental 79 10.62% Yes (64+15) Aerospace 255 34.27% Yes Communications 50 6.72% No Health/Fitness 60 8.06% No Heavy euipment 300 40.32% Yes Total 744 Percentage of more than 10% will be a reportable segment Schedule for 10% segment profit or loss test: Segment Segment Profit/(loss) Percent of test amount Reportable Segment (>10%) (Note:1) Car rental 42 51.85% Yes Aerospace 5 6.17% No Communications 13 16.05% Yes Health/Fitness 21 25.93% Yes Heavy euipment -11 13.58% Yes Total 70 Denomiantor for percentage determination is greater in absolute amount the combined profit of all profit making segments or combined loss of all loss making segments Denominator=81 or 11 whichever is grater=$ 81 Note:1-Segment profit/(loss): Car rental Aerospace Communications Health/ Fitness Heavy Equipment Revenue: Sales 255 50 60 300 Rentals 64 Intersegment sales 15 Total (A) 79 255 50 60 300 Cost of goods sold (B) 133 182 Gross profit ©=(A)-(B) 79 122 50 60 118 Less: Expenses Selling expenses 21 92 14 22 87 Other traceable expense 9 13 16 10 30 Allocation of common costs 7 12 7 7 12 Segment profit/(Loss) 42 5 13 21 -11 Schedule for Segment assets test: Segment Segment Profit/(loss) Percent of test amount Reportable Segment (>10%) Car rental 70 9.68% No Aerospace 157 21.72% Yes Communications 120 16.60% Yes Health/Fitness 130 17.98% Yes Heavy euipment 246 34.02% Yes Total 723 b. Multiplexer\'s reportable segments meet 75% revenue test since all the segments are reportable Segment Reportable as per revenue test Reportable as per profit/ (loss) test Reportable as per Asset test Car rental Yes Yes No Aerospace Yes No Yes Communications No Yes Yes Health/Fitness No Yes Yes Heavy euipment Yes Yes Yes c. Industry segments Item Car rental Aerospace Communications Health/ Fitness Heavy Equipment Combined Sales to unaffiliated customers 64 255 50 60 300 729 Intersegment sales 15 15 Total revenue 79 255 50 60 300 744 Depreciation 9 65 9 10 75 168 Segment profit 42 5 13 21 -11 70 Segment assets 70 157 120 130 246 723 Expenditures for segment assets 8 80 65 90 243