When Defining a Reportable Segment, Which of the Following Conditions

question 46

Multiple Choice

When defining a reportable segment, which of the following conditions would be sufficient to allow a company to combine two operating segments for purposes of testing?

• A) The products sold by each segment are produced in the same plant.
• B) Both segments have several customers in common.
• C) The segments may sell different products, but they have a similar production process.
• D) Both segments are required to adhere to U.S. Department of Labor regulations regarding immigration laws.
• E) Both segments are owned by the same parent company.

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Definitions:

Consolidated Sales

The total sales of a parent company and its subsidiaries, after eliminating intercompany sales, reported in the consolidated financial statements.

Normal Markup

The standard amount or percentage added to the cost of a product to determine its selling price.

Common Stock

Equity securities that represent ownership in a company, providing voting rights and a share in the company’s profits through dividends.

Equity Method

A method of accounting for investments, where the investor recognizes its share of investee's profits and losses in its own income statement, typically used when the investor has significant influence over the investee.