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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GILMOUR COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2018 AND 2017
December 31
	2018	2017
Assets
Cash	\( 180,000	\) 275,000
Accounts receivable (net)	220,000	155,000
Short-term investments	270,000	150,000
Inventories	1,060,000	980,000
Prepaid expenses	25,000	25,000
Plant & equipment	2,585,000	1,950,000
Accumulated depreciation	(1,000,000)	(750,000)
	\(3,340,000	(2,785,000)

Liabilities and Stockholders’ Equity
Accounts payable	\) 50,000	\( 75,000
Accrued expenses	170,000	200,000
Bonds payable	450,000	190,000
Common stock	2,100,000	1,770,000
Retained earnings	570,000	550,000
	\)3,340,000	(2,785,000)

(\(000 omitted)
	2018	2017	2016	2015	2014
Sales revenue	\)20,000	\(16,000	\)14,000	\(6,000	\)4,000
Net income	2,400	14,000	800	700	250
Average total assets	22,000	19,000	11,500	4,200	3,000
Current assets	8,000	6,000	3,000	1,200	1,000
Working capital	3,600	3,200	1,200	500	400
Common shares: Number of shares Outstanding (000) Average market price	2,000 \(9	2,000 \)6	2,000 $4	20 -	20 -

BRADBURN CORPORATION BALANCE SHEET MARCH 31
Assets	2018	2017
Cash	\) 18,200	\( 12,500
Notes receivable	148,000	132,000
Accounts receivable (net)	131,800	125,500
Inventories (at cost)	105,000	50,000
Plant & Equipment (net of depreciation)	1,449,000	1,420,500
Total assets	\)1,852,000	\(1,740,500

Liabilities and Stockholders’ Equity
Accounts payable	\) 79,000	\( 91,000
Notes payable	76,000	61,500
Accrued liabilities	9,000	6,000
Common stock (130,000 shares, \)10 par)	1,300,000	1,300,000
Retained earnings*	388,000	282,000
Total liabilities and stockholders’ equity	\(1,852,000	\)1,740,500


BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31
	2018	2017
Sales revenue	\(3,000,000	\)2,700,000
Cost of goods sold*	1,530,000	1,425,000
Gross margin	1,470,000	1,275,000
Operating expenses	860,000	780,000
Income before income taxes	610,000	495,000
Income taxes (40%)	244,000	198,000
Net income	\( 366,000	\) 297,000

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