Osprin Corporation has three operating segments, as summarized below:

Capsule Pill Liquid Total
Sales to retailers 25,000 35,000 5,000 65,000
Intersegment sales 4,000 10,000 2,000 16,000
Operating Expenses 10,000 18,000 5,000 33,000
Interest Expense 2,000 3,000 1,000 6,000
Income Tax Expense 4,000 6,000 1,000 11,000
Assets 12,000 3,000 16,000 31,000

Required:
1. Using the revenue test, what is the minimum amount of revenue of a reportable segment?

2. Using the operating profit or loss test, what is the minimum amount of operating profit or loss of a reportable segment?

3. Using the asset test, what is the minimum amount of assets of a reportable segment?

4. Based on the three tests, which segments will be separately reported?

1. Total revenue including intersegment sales = $65,000 + $16,000 = $81,000. The test value limit is $8,100 ($81,000 × 10%).

2. The operating profit or loss test includes the operating profit or loss for each segment, which excludes Interest Expense and Income Tax Expense.

Capsule Pill Liquid Total
Sales to retailers 25,000 35,000 5,000 65,000
Intersegment sales 4,000 10,000 2,000 16,000
Operating Expenses 10,000 18,000 5,000 33,000
Operating Profit 19,000 27,000 2,000 48,000

Total operating profit (all segments had profit; no segments had a loss) = $48,000. The test value limit is $4,800 ($48,000 × 10%).

3. The assets of all segments combined is $31,000. The test value limit is $3,100 ($31,000 × 10%).

4. Under the revenue test, the Capsule and Pill segments are reportable. The Liquid segment's total sales ($5,000 + $2,000) is $7,000 and does not exceed the limit. Under the operating profit or loss test, the Capsule and Pill segments are reportable. Under the asset test, the Capsule and Liquid segments are reportable. Because each segment meets at least one of the three tests, they will all be considered reportable segments.