Question

Collins Company reported consolidated revenue of $120,000,000 in 20X8. Collins operates in two geographic areas, domestic and Asia. The following information pertains to these two areas:

Sales to External Interarea Sales
Customers Between Affiliates
Domestic $70,000,000 $12,000,000
Asia $50,000,000 $8,000,000
What calculation below is correct to determine if the revenue test is satisfied for the Asian operations?
a. $58,000,000/$120,000,000.
b. $50,000,000/$140,000,000.
c. $58,000,000/$140,000,000.
d. $50,000,000/$120,000,000.

Answer 1

d. $50,000,000/$120,000,000

Step-by-step explanation:

The computation of the correct calculation when the revenue test is satisfied is shown below:

As we can see that the fourth option is correct i.e.

= Asian sales ÷ Total consolidated sales.

= $50,000,000 ÷ $120,000,000

Here the affiliate sales are not relevant so the same is not considered

Hence, the correct option is d.