P13-17 Evaluating Foreign Operations
For many years, Clark Company operated exclusively in the United States but recently expanded its operations to the Pacific Rim countries of New Zealand, Singapore, and Australia. After a modest beginning in these countries, recent successes have resulted in an increased level of operations in each country. Operating information (in thousands of U.S. dollars) for the company's domestic and foreign operations follows.
United States New Zealand Singapore Australia
Sales to unaffiliated $2,500 $320 $60 $120
Interarea sales 100
Operating expenses 1,820 290 70 30
Long-lived assets 2,200 280 140 80
In addition, common costs of $120,000 are to be allocated to operations on the basis of the ratio of an area's sales to nonaffiliates to total company sales to nonaffiliates.
Required
a. Determine the profit or loss for each geographic segment.
b. Discuss the general reporting requirements related to the company's geographic areas.
c. Determine which, if any, of the three individual foreign geographic segments is separately reportable using a 10 percent materiality threshold.
