1.
To prepare: Three column report for total expenses, eliminated expenses and continuing expenses.
1.

Explanation of Solution
Given below is the three column report for analysis of expenses under elimination of department 200 of E Company:
E Company | ||||
Particulars | Total expenses ($) | Eliminated expenses ($) | Continuing expenses ($) | |
Cost of goods sold | 469,000 | 207,000 | 262,000 | |
Direct expenses | ||||
Advertising | 29,000 | 12,000 | 17,000 | |
Store supplies used | 7,800 | 3,800 | 4,000 | |
8,300 | 8,300 | |||
Allocated expenses | ||||
Sales salaries | 104,000 | 52,000 | 52,000 | |
Rent expenses | 14,160 | 14,160 | ||
18,000 | 8,100 | 9,900 | ||
Office salary | 31,200 | - | 31,200 | |
Insurance expenses | 3,100 | 770 | 2,330 | |
Miscellaneous office expenses | 4,000 | 400 | 3,600 | |
Total expenses | 688,560 | 284,070 | 404,490 | |
Table (1) |
Hence, total expenses are $688,560, eliminated expenses are $284,070 and continuing expenses are $404,490.
2.
To prepare:
2.

Explanation of Solution
Given below is the
Annual income statement | ||||
Particulars | Amount ($) | |||
Sales | 436,000 | |||
Less: Cost of goods sold | 262,000 | |||
Gross profit | 174,000 | |||
Operating expenses | ||||
Advertising | 17,000 | |||
Store supplies | 4,000 | |||
Depreciation-Store equipment | 8,300 | |||
Total direct expenses | 29,300 | |||
Allocated expenses | ||||
Sales salaries | 67,600 | |||
Rent expenses | 14,160 | |||
Bad debts expenses | 9,900 | |||
Office salary | 15,600 | |||
Insurance expenses | 2,330 | |||
Miscellaneous office expense | 3,600 | |||
Total allocated expenses | 113,190 | |||
Total expenses | 142,490 | |||
Net income (loss) | 31,510 | |||
Table (2) |
Hence, forecasted net income is $31,510.
3.
To prepare:
3.

Explanation of Solution
Given below is the reconciliation statement of combined income with forecasted income of E Company:
Reconciliation statement | ||||
Particulars | Amount ($) | |||
Combined net income | 37,440 | |||
Savings of total expenses | 284,070 | |||
Loss of revenue (sales) | (290,000) | |||
Forecasted income | 31,510 | |||
Table (3) |
Hence, forecasted income reconcile with combined income at $31,510.
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Chapter 10 Solutions
Managerial Accounting
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