Homework SourseGlades Sporting Goods Co operates two divisionsthe Winter Sp
Glades Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:
The bases to be used in allocating expenses, together with other essential information, are as follows:
Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000.
Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading.
Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices.
Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 square feet.
Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required.
Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.
Check My Work3 more Check My Work uses remaining.
| Sales—Winter Sports Division | $12,600,000 |
| Sales—Summer Sports Division | 16,300,000 |
| Cost of Goods Sold—Winter Sports Division | 7,560,000 |
| Cost of Goods Sold—Summer Sports Division | 9,454,000 |
| Sales Expense—Winter Sports Division | 2,016,000 |
| Sales Expense—Summer Sports Division | 2,282,000 |
| Administrative Expense—Winter Sports Division | 1,260,000 |
| Administrative Expense—Summer Sports Division | 1,450,700 |
| Advertising Expense | 578,000 |
| Transportation Expense | 265,660 |
| Accounts Receivable Collection Expense | 174,000 |
| Warehouse Expense | 1,540,000 |
Solution
Workings
In respect of warehouse, rate per sq.ft was computed as 1540000 / 220000 = 7 per sq.ft
| DIVISIONAL INCOME STATEMENT | ||
| Winter sports division | Summer Sports division | |
| Sales | 12,600,000 | 16,300,000 |
| Cost of goods sold | 7560000 | 9454000 |
| Gross profit | 5,040,000 | 6,846,000 |
| Divisional selling expenses | 2016000 | 2282000 |
| Divisional administrative | 1,260,000 | 1,450,700 |
| Operating expenses | 3276000 | 3732700 |
| Income from operations before service department charges | 1,764,000 | 3,113,300 |
| Less service department | ||
| Advertising | 252000 | 326000 |
| Transportation | 127280 | 138380 |
| Accounts receivbales collection | 69000 | 105000 |
| Warehouse expenses | 714000 | 826000 |
| Total | 1162280 | 1395380 |
| Income from operations | 601,720 | 1,717,920 |
