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: 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 The bases to be used in allocating expenses, together with other essential information, are as follows: A. Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000. B. 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. C. 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. D. 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. Required: 1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.) 2. Provide supporting calculations for service department charges. Labels For the Year Ended December 31, 20Y8 For the Month Ended December 31, 20Y8 Service department charges Amount Descriptions Accounts receivable collection expense Advertising expense Cost of goods sold Divisional administrative expenses Divisional selling expenses Gross profit Income from operations Income from operations before service department charges Sales Total divisional expenses Total service department charges Transportation expense Warehouse expense 1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.) GLADES SPORTING GOODS CO. Divisional Income Statements 1 Winter Sports Division Summer Sports Division 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2. Provide supporting calculations for service department charges. Service Department Charges Winter Sports Division Summer Sports Division Total Advertising expense Transportation rate per bill of lading × Number of bills of lading Transportation expense Accounts receivable collection rate × Number of sales invoices Accounts receivable collection expense Warehouse rate per sq. ft. × Number of square feet Warehouse expense
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: 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 The bases to be used in allocating expenses, together with other essential information, are as follows: A. Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000. B. 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. C. 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. D. 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. Required: 1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.) 2. Provide supporting calculations for service department charges. Labels For the Year Ended December 31, 20Y8 For the Month Ended December 31, 20Y8 Service department charges Amount Descriptions Accounts receivable collection expense Advertising expense Cost of goods sold Divisional administrative expenses Divisional selling expenses Gross profit Income from operations Income from operations before service department charges Sales Total divisional expenses Total service department charges Transportation expense Warehouse expense 1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.) GLADES SPORTING GOODS CO. Divisional Income Statements 1 Winter Sports Division Summer Sports Division 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2. Provide supporting calculations for service department charges. Service Department Charges Winter Sports Division Summer Sports Division Total Advertising expense Transportation rate per bill of lading × Number of bills of lading Transportation expense Accounts receivable collection rate × Number of sales invoices Accounts receivable collection expense Warehouse rate per sq. ft. × Number of square feet Warehouse expense
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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:
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 |
174,000 | |
Warehouse Expense | 1,540,000 |
The bases to be used in allocating expenses, together with other essential information, are as follows:
A. | Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000. |
B. | 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. |
C. | 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. |
D. | 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. |
Required: | |
1. | Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.) |
2. | Provide supporting calculations for service department charges. |
Labels | |
For the Year Ended December 31, 20Y8 | |
For the Month Ended December 31, 20Y8 | |
Service department charges | |
Amount Descriptions | |
Accounts receivable collection expense | |
Advertising expense | |
Cost of goods sold | |
Divisional administrative expenses | |
Divisional selling expenses | |
Gross profit | |
Income from operations | |
Income from operations before service department charges | |
Sales | |
Total divisional expenses | |
Total service department charges | |
Transportation expense | |
Warehouse expense |
1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.)
GLADES SPORTING GOODS CO.
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Summer Sports Division
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2. Provide supporting calculations for service department charges.
Service Department Charges | |||
Winter Sports Division | Summer Sports Division | Total | |
Advertising expense |
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Transportation rate per bill of lading |
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× Number of bills of lading |
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× Number of square feet |
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Warehouse expense |
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