Williams Company began operations in January 2019 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.   WILLIAMS COMPANY Departmental Income Statements For Year Ended December 31, 2019   Clock Mirror Combined Sales $ 130,000   $ 55,000   $ 185,000   Cost of goods sold   63,700     34,100     97,800   Gross profit   66,300     20,900     87,200   Direct expenses                   Sales salaries   20,000     7,000     27,000   Advertising   1,200     500     1,700   Store supplies used   900     400     1,300   Depreciation—Equipment   1,500     300     1,800   Total direct expenses   23,600     8,200     31,800   Allocated expenses                   Rent expense   7,020     3,780     10,800   Utilities expense   2,600     1,400     4,000   Share of office department expenses   10,500     4,500     15,000   Total allocated expenses   20,120     9,680     29,800   Total expenses   43,720     17,880     61,600   Net income $ 22,580   $ 3,020   $ 25,600       Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $50,000 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries, $8,000; advertising, $800; store supplies, $500; and equipment depreciation, $200. It will fit the new department into the current rented space by taking some square footage from the other two departments. When opened, the new Painting department will fill one-fifth of the space presently used by the Clock department and one-fourth used by the Mirror department. Management does not predict any increase in utilities costs, which are allocated to the departments in proportion to occupied space (or rent expense). The company allocates office department expenses to the operating departments in proportion to their sales. It expects the Painting department to increase total office department expenses by $7,000. Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 8%. No changes for those departments’ gross profit percents or their direct expenses are expected except for store supplies used, which will increase in proportion to sales.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Problem 22-3A Departmental income statements; forecasts LO P3

Williams Company began operations in January 2019 with two operating (selling) departments and one service (office) department. Its departmental income statements follow.
 

WILLIAMS COMPANY
Departmental Income Statements
For Year Ended December 31, 2019
  Clock Mirror Combined
Sales $ 130,000   $ 55,000   $ 185,000  
Cost of goods sold   63,700     34,100     97,800  
Gross profit   66,300     20,900     87,200  
Direct expenses                  
Sales salaries   20,000     7,000     27,000  
Advertising   1,200     500     1,700  
Store supplies used   900     400     1,300  
Depreciation—Equipment   1,500     300     1,800  
Total direct expenses   23,600     8,200     31,800  
Allocated expenses                  
Rent expense   7,020     3,780     10,800  
Utilities expense   2,600     1,400     4,000  
Share of office department expenses   10,500     4,500     15,000  
Total allocated expenses   20,120     9,680     29,800  
Total expenses   43,720     17,880     61,600  
Net income $ 22,580   $ 3,020   $ 25,600  
 

 
Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $50,000 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries, $8,000; advertising, $800; store supplies, $500; and equipment depreciation, $200. It will fit the new department into the current rented space by taking some square footage from the other two departments. When opened, the new Painting department will fill one-fifth of the space presently used by the Clock department and one-fourth used by the Mirror department. Management does not predict any increase in utilities costs, which are allocated to the departments in proportion to occupied space (or rent expense). The company allocates office department expenses to the operating departments in proportion to their sales. It expects the Painting department to increase total office department expenses by $7,000. Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 8%. No changes for those departments’ gross profit percents or their direct expenses are expected except for store supplies used, which will increase in proportion to sales.
 
Required:
Prepare departmental income statements that show the company’s predicted results of operations for calendar-year 2020 for the three operating (selling) departments and their combined totals. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)

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