1 Required information The following information applies to

1 Required information The following information applies to the questions displayed below. Elegant Decor Company\'s management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company\'s 2017 departmental income statements show the following ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended Decenber 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Dept. 100 Dept. 200 Combined 453,000 $292,000 $745,000 267,000 214,000481,000 8,000 264,000 186,000 Direct expenses Advertising Store supplies used Depreciation-Store equipment Total direct expenses 14,000 3,400 18,000 32,000 7,400 4,000 4,800 26, 800 6,8003700 47,900 Allocated expenses 78,000 Sales salaries Rent expense Bad debts expense office salary Insurance expense Miscellaneous office expenses Total allocated expenses 46,800 124,800 4,79014,210 17,200 12,480 31,200 3,000 4,300 9,420 9,700 7,500 18,720 1,900 2,500 1,100 1,800 120,240 74,470194,71 Total expenses Net income (loss) 147,040 95,570 242,610 38,960 (17,570) 21,390

Solution

In order to prepare the income statement after elimination of department 200, use the following steps:

Use the above steps to create the below table:

Elegant Décor Company

Forecasted annual income statement

Under plan to eliminate Department 200

Dep 100

Dep 200

Combined

Sales

$453,000.00

$0.00

$453,000.00

COGS

$267,000.00

$0.00

$267,000.00

Gross profit

$186,000.00

$0.00

$186,000.00

Operating expense

Direct expenses

Advertising

$18,000.00

$0.00

$18,000.00

Store supplies

$4,000.00

$0.00

$4,000.00

Depreciation

$4,800.00

$0.00

$4,800.00

Total direct expense

$26,800.00

$0.00

$26,800.00

Allocated expenses

Sales salaries

$78,000.00

$0.00

$78,000.00

Rent expense

$9,420.00

$7,500.00

$16,920.00

Bad debts

$9,700.00

$0.00

$9,700.00

Office salaries

$15,600.00

$0.00

$15,600.00

Insurance expense

$1,900.00

$429.00

$2,329.00

Misc office expnses

$2,500.00

$1,404.00

$3,904.00

Total allocated expenses

$117,120.00

$9,333.00

$126,453.00

Total expenses

$143,920.00

$9,333.00

$153,253.00

Net Income

$42,080.00

($9,333.00)

$32,747.00

Use the above figures in column D and fill the same figures in the given format:

Elegant Décor Company

Forecasted annual income statement

Under plan to eliminate Department 200

Combined

Sales

$453,000.00

COGS

$267,000.00

Gross profit

$186,000.00

Operating expense

Direct expenses

Advertising

$18,000.00

Store supplies

$4,000.00

Depreciation

$4,800.00

Total direct expense

$26,800.00

Allocated expenses

Sales salaries

$78,000.00

Rent expense

$16,920.00

Bad debts

$9,700.00

Office salaries

$15,600.00

Insurance expense

$2,329.00

Misc office expnses

$3,904.00

Total allocated expenses

$126,453.00

Total expenses

$153,253.00

Net Income

$32,747.00

Elegant Décor Company
Forecasted annual income statement
Under plan to eliminate Department 200
	Dep 100	Dep 200	Combined
Sales	$453,000.00	$0.00	$453,000.00
COGS	$267,000.00	$0.00	$267,000.00
Gross profit	$186,000.00	$0.00	$186,000.00
Operating expense
Direct expenses
Advertising	$18,000.00	$0.00	$18,000.00
Store supplies	$4,000.00	$0.00	$4,000.00
Depreciation	$4,800.00	$0.00	$4,800.00
Total direct expense	$26,800.00	$0.00	$26,800.00
Allocated expenses
Sales salaries	$78,000.00	$0.00	$78,000.00
Rent expense	$9,420.00	$7,500.00	$16,920.00
Bad debts	$9,700.00	$0.00	$9,700.00
Office salaries	$15,600.00	$0.00	$15,600.00
Insurance expense	$1,900.00	$429.00	$2,329.00
Misc office expnses	$2,500.00	$1,404.00	$3,904.00
Total allocated expenses	$117,120.00	$9,333.00	$126,453.00
Total expenses	$143,920.00	$9,333.00	$153,253.00
Net Income	$42,080.00	($9,333.00)	$32,747.00