2P_b Cineplex Corporation is a divers... [FREE SOLUTION]

Chapter 24: 2P_b (page 1450)

Cineplex Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2018.
A
B
C
D
E
Sales revenue
$40,000
$75,000
$580,000
$35,000
$55,000
Cost of goods sold
19,000
50,000
270,000
19,000
30,000
Operating expenses
10,000
40,000
235,000
12,000
18,000
Total expenses
29,000
90,000
505,000
31,000
48,000
Operating profit (loss)
$11,000
$(15,000)
$75,000
$4,000
$7,000
Identifiable assets
$35,000
$80,000
$500,000
$65,000
$50,000
Sales of segments B and C included intersegment sales of $20,000 and $100,000, respectively.
Instructions
(b) Prepare the necessary disclosures required by GAAP.

Short Answer

Expert verified

Revenues, assets, and profit from reportable segments are $575,000, $615,000 and $71,000 respectively.

Step by step solution

Meaning of GAAP

GAAP provides a uniform technique for compiling financial statements and executing accounting functions for businesses. Small business owners and accountants can use GAAP to maintain track of a company's finances. GAAP simplifies the presentation of a company's finances to outside parties (such as banks).

Disclosures required by GAAP

	A	B	C	Others	Total
External Revenues	$40,000	$ 55,000	$480,000	$ 90,000	$665,000
Intersegment Revenues		20,000	100,000		120,000
Total Revenues	40,000	75,000	580,000	90,000	$785,000
Cost of Goods Sold	19,000	50,000	270,000	49,000
Operating Expenses	10,000	40,000	235,000	30,000
Total Expenses	29,000	90,000	505,000	79,000
Operating Profit (Loss)	$11,000	$(15,000)	$75,000	$11,000	$82,000
Identifiable Assets	$35,000	$80,000	$500,000	$115,000	$730,000

Working notes:

Reconciliation of revenues

Total segment revenues	$785,000
Revenues of immaterial segments	(90,000)
Elimination of intersegment revenues	(120,000)
Revenues from reportable segments	$575,000

Reconciliation of profit or loss

Total segment operating profit	$ 82,000
Profits of immaterial segments	(11,000)
Profits from reportable segments	$ 71,000

Reconciliation of profit or loss

Total segment assets	$730,000
Assets of immaterial segments	(115,000)
Assets from reportable segments	$615,000

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RNA INC. INCOME STATEMENT FOR THE YEAR ENDED NOVEMBER 30, 2018 (IN THOUSANDS)
Sales (net)	\(30,500
Interest income	500
Total revenue	31,000
Costs and expenses
Cost of goods sold	17,600
Selling and administrative expenses	3,550
Depreciation and amortization expense	1,890
Interest expense	900
Total costs and expenses	23,940
Income before taxes	7,060
Income taxes	2,800
Net income	\) 4,260

RNA INC. BALANCE SHEET AS OF NOVEMBER 30 (IN THOUSANDS)
	2018	2017
Cash	\( 400	\) 500
Short-term investments (at cost)	300	200
Accounts receivable (net)	3,200	2,900
Inventory	6,000	5,400
Total current assets	9,900	9,000
Property, plant, & equipment (net)	7,100	7,000
Total assets	\(17,000	\)16,000
Accounts payable	\( 3,700	\) 3,400
Income taxes payable	900	800
Accrued expenses	1,700	1,400
Total current liabilities	6,300	5,600
Long-term debt	2,000	1,800
Total liabilities	8,300	7,400
Common stock (\(1 par value)	2,700	2,700
Paid-in capital in excess of par	1,000	1,000
Retained earnings	5,000	4,900
Total stockholders鈥� equity	8,700	8,600
Total liabilities and stockholders鈥� equity	\)17,000	$16,000

SELECTED FINANCIAL RATIOS
RNA INC
	2017	2016	Current Inventory Average
Current ratio	1.61	1.62	1.63
Acid-test ratio	0.64	0.63	0.68
Times interest earned	8.55	8.50	8.45
Profit margin on sales	13.2%	12.1%	13.0%
Asset turnover	1.84	1.83	1.84
Inventory turnover	3.17	3.21	3.18

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Short Answer

Step by step solution

Meaning of GAAP

Disclosures required by GAAP

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	A	B	C	D	E
Sales revenue	\(40,000	\)75,000	\(580,000	\)35,000	\(55,000
Cost of goods sold	19,000	50,000	270,000	19,000	30,000
Operating expenses	10,000	40,000	235,000	12,000	18,000
Total expenses	29,000	90,000	505,000	31,000	48,000
Operating profit (loss)	\)11,000	\((15,000)	\)75,000	\(4,000	\)7,000
Identifiable assets	\(35,000	\)80,000	\(500,000	\)65,000	\(50,000