Question

Pastel Company operates in the following lines of business which management believes have distinguishable return and risk characteristics: Revenues Assets Food 500 2,000 Beverages 1,300 6,000 Entertainment 2,500 10,000 Lodging 5,000 20,000 Services 22,000 28,000 International 700 3,000 Totals 32,000 69,000 For which of these lines is Pastel required to report segment data? A) Entertainment, Lodging, and Services. B) International only. C) Services and International.

Answer 1

Pastel Company is required to report segment data for the Entertainment, Lodging, and Services segments as they exceed the 10% threshold for revenues and assets. Option A is correct .

Step-by-step explanation:

According to financial reporting standards, a company is required to report segment data if the segment meets certain quantitative thresholds. A common rule is the 10% rule, meaning any segment that represents 10% or more of the company's revenue, profits, or assets should be reported separately. Using Pastel Company's provided data, the Services, Lodging, and Entertainment segments exceed the 10% threshold for both revenues and assets: Services (68.75% of revenues and 40.58% of assets), Lodging (15.63% of revenues and 28.99% of assets), and Entertainment (7.81% of revenues and 14.49% of assets). Therefore, Pastel is required to report segment data for Entertainment, Lodging, and Services.

Answer 2

A) Entertainment, Lodging, and Services

Step-by-step explanation:

Under Generally Accepted Accounting Principles (GAAP), you need to follow these rules to report segment data:

• If at least 10% of revenues, profit or combined assets are under one segment.
• And together with the above the total revenue must overcome the 75% of the entity.

Revenues Assets Rev/Assets

Food 500 2.000 3%

Beverages 1.300 6.000 9%

Entertainment 2.500 10.000 14%

Lodging 5.000 20.000 29%

Services 22.000 28.000 41%

International 700 3.000 4%

32.000 69.000 100%

A) Entertainment, Lodging, and Services

• Revenues 92% of total entity.
• Assets 84% of total entity.