In Determining Whether a Segment Should Be Reported, a Profit

question 10

Multiple Choice

In determining whether a segment should be reported, a profit and loss test can be used.The test selects segments for reporting by:

• A)​only including profitable segments.
• B)​comparing the absolute value of a segment's profit or loss to 10% of all segments cumulative profit or cumulative loss, whichever is higher.
• C)​comparing the absolute value of a segment's profit or loss to 10% of all segments combined profits and losses.
• D)​comparing the profit or loss of a segment to 10% of all segment external revenue.

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Definitions:

Sales

The process where goods or services are traded for money, which constitutes the main revenue stream for the majority of companies.

Operating Cycle

The period it takes for a business to buy inventory, sell it to customers, and collect the cash from these sales.

Credit Sales

Revenues earned by selling goods or services that are paid for over time under agreed payment terms, rather than paid in full upfront.

COGS

Acronym for Cost of Goods Sold, which refers to the direct costs attributable to the production of the goods sold by a company.