WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2020 Combined Clock Mirror Paintings $ 188,700 S $ 53,000 $ 347,150 Sales 105,450 Cost of goods sold Gross profit Direct expenses 138,958 96,237 40,071 2,650 92,463 65,379 50,350 208,192 7,000 Sales salaries 22,000 8,500 1,700 1,200 Advertising 500 300 Store supplies used 1,000 600 1,700 Depreciation of equipment 400 700 Total direct expenses 26,400 8,200 11,000 0 Allocated expenses Rent expense 2,351 5,624 2,835 10,810 Utilities expense 1,153 2,757 1,390 Share of office dept. expenses 11,000 10,500 Total allocated expenses 19,381 14,725 3,504 10,810 Total expenses 10,810 45,781 22,925 14,504 Net income 197,382 46,682 42,454 35,846

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Topic Video
Question

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 $ 170,000   $ 95,000   $ 265,000  
Cost of goods sold   83,300     58,900     142,200  
Gross profit   86,700     36,100     122,800  
Direct expenses                  
Sales salaries   22,000     7,000     29,000  
Advertising   1,700     500     2,200  
Store supplies used   1,000     300     1,300  
Depreciation—Equipment   1,700     400     2,100  
Total direct expenses   26,400     8,200     34,600  
Allocated expenses                  
Rent expense   7,030     3,780     10,810  
Utilities expense   2,800     2,500     5,300  
Share of office department expenses   11,000     10,500     21,500  
Total allocated expenses   20,830     16,780     37,610  
Total expenses   47,230     24,980     72,210  
Net income $ 39,470   $ 11,120   $ 50,590  
 

 
Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $53,000 in sales with a 95% gross profit margin and will require the following direct expenses: sales salaries, $8,500; advertising, $1,200; store supplies, $600; and equipment depreciation, $700. 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 $7,100. Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 6%. 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.)
 

WILLIAMS COMPANY
Forecasted Departmental Income Statements
For Year Ended December 31, 2020
Combined
Clock
Mirror
Paintings
$ 188,700 S
$
53,000
$
347,150
Sales
105,450
Cost of goods sold
Gross profit
Direct expenses
138,958
96,237
40,071
2,650
92,463
65,379
50,350
208,192
7,000
Sales salaries
22,000
8,500
1,700
1,200
Advertising
500
300
Store supplies used
1,000
600
1,700
Depreciation of equipment
400
700
Total direct expenses
26,400
8,200
11,000
0
Allocated expenses
Rent expense
2,351
5,624
2,835
10,810
Utilities expense
1,153
2,757
1,390
Share of office dept. expenses
11,000
10,500
Total allocated expenses
19,381
14,725
3,504
10,810
Total expenses
10,810
45,781
22,925
14,504
Net income
197,382
46,682
42,454
35,846
Transcribed Image Text:WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2020 Combined Clock Mirror Paintings $ 188,700 S $ 53,000 $ 347,150 Sales 105,450 Cost of goods sold Gross profit Direct expenses 138,958 96,237 40,071 2,650 92,463 65,379 50,350 208,192 7,000 Sales salaries 22,000 8,500 1,700 1,200 Advertising 500 300 Store supplies used 1,000 600 1,700 Depreciation of equipment 400 700 Total direct expenses 26,400 8,200 11,000 0 Allocated expenses Rent expense 2,351 5,624 2,835 10,810 Utilities expense 1,153 2,757 1,390 Share of office dept. expenses 11,000 10,500 Total allocated expenses 19,381 14,725 3,504 10,810 Total expenses 10,810 45,781 22,925 14,504 Net income 197,382 46,682 42,454 35,846
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 3 images

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education