Required: 1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations. Thomas Railroad Company Divisional Income Statements For the Quarter Ended December 31 Revenues Operating expenses Income from operations before service department charges Less service department charges: Dispatching Equipment Management Total service department charges Income from operations North South West 2. What is the profit margin of each division? Round to one decimal place. Profit Margin Region North Region South Region West Region Identify the most successful region according to the profit margin. 3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions? a. The method used to evaluate the performance of the divisions should be reevaluated. b. A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets). c. A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets). d. None of these choices would be included. e. All of these choices (a, b & c) would be included. Previous Next
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
![1:27
AA
HW CH 24
Profit Center Responsibility Reporting for a Service Company
Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West
(W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional
performance using income from operations as a percent of revenues. The following quarterly
income and expense accounts were provided from the trial balance as of December 31:
Revenues-N Region
Revenues-S Region
Revenues-W Region
Operating Expenses-N Region
Operating Expenses-S Region
Operating Expenses-W Region
Corporate Expenses-Dispatching
Corporate Expenses-Equipment Management
Corporate Expenses-Treasurer's
General Corporate Officers' Salaries
Number of scheduled trains
Number of railroad cars in inventory
Required:
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$929,300
Revenues
Operating expenses
Income from operations before service department charges
Less service department charges:
Dispatching
Equipment Management
Total service department charges
Income from operations
く
1,095,400
1,937,200
Assignment Score: 0.0%
588,900
651,900
1,171,500
475,200
The company operates three service departments: the Dispatching Department, the
Equipment Management Department, and the Treasurer's Department. The Treasurer's
Department and general corporate officers' salaries are not controllable by division
management. The Dispatching Department manages the scheduling and releasing of
completed trains. The Equipment Management Department manages the inventories of
railroad cars. It makes sure the right freight cars are at the right place at the right time. The
Treasurer's Department conducts a variety of services for the company as a whole. The
following additional information has been gathered:
205,200
141,300
312,100
1. Prepare quarterly income statements showing income from operations for the three
regions. Use three column headings: North, South, and West. Do not round your interim
calculations.
North South West
5,400 6,500 9,700
1,000 1,500 1,300
Thomas Railroad Company
Divisional Income Statements
For the Quarter Ended December 31
all?
North South West
2. What is the profit margin of each division? Round to one decimal place.
Region
Profit Margin
10000
B
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![1:27
AA
HWCH 24
General Corporate Officers Salaries
Number of scheduled trains
Number of railroad cars in inventory
Required:
312,100
The company operates three service departments: the Dispatching Department, the
Equipment Management Department, and the Treasurer's Department. The Treasurer's
Department and general corporate officers' salaries are not controllable by division
management. The Dispatching Department manages the scheduling and releasing of
completed trains. The Equipment Management Department manages the inventories of
railroad cars. It makes sure the right freight cars are at the right place at the right time. The
Treasurer's Department conducts a variety of services for the company as a whole. The
following additional information has been gathered:
v2.cengagenow.com
1. Prepare quarterly income statements showing income from operations for the three
regions. Use three column headings: North, South, and West. Do not round your interim
calculations.
Revenues
Operating expenses
Income from operations before service department charges $
Less service department charges:
Dispatching
Equipment Management
Total service department charges
Income from operations
Thomas Railroad Company
Divisional Income Statements
For the Quarter Ended December 31
Check My Work
North South West
6,500 9,700
5,400
1,000 1.500 1,300
2. What
Region
North Region
South Region
West Region
Identify the most successful region according to the profit margin.
Assignment Score: 0.0%
く
%
%
North South West
the profit margin of each division? Round to one decimal place.
Profit Margin
3. What would you include in a recommendation to the CEO for a better method for
evaluating the performance of the divisions?
a. The method used to evaluate the performance of the divisions should be
reevaluated.
b. A better divisional performance measure would be the rate of return on
investment (income from operations divided by divisional assets).
c. A better divisional performance measure would be the residual income (income
from operations less a minimal return on divisional assets).
d. None of these choices would be included.
e. All of these choices (a, b & c) would be included.
all?
8
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