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 Z of E Company:
E Company | ||||
Particulars | Total expenses ($) | Eliminated expenses ($) | Continuing expenses ($) | |
Cost of goods sold | 586,400 | 125,100 | 461,300 | |
Direct expenses | ||||
Advertising | 30,000 | 3,000 | 27,000 | |
Store supplies used | 7,000 | 1,400 | 5,600 | |
21,000 | 21,000 | |||
Allocated expenses | ||||
Sales salaries | 93,600 | 33,800 | 59,800 | |
Rent expenses | 27,600 | 27,600 | ||
25,000 | 4,000 | 21,000 | ||
Office salary | 26,000 | 13,000 | 13,000 | |
Insurance expenses | 5,600 | 910 | 4,690 | |
Miscellaneous office expenses | 4,200 | 750 | 3,450 | |
Total expenses | 826,400 | 181,960 | 644,440 | |
Table (1) |
Hence, total expenses are $826,400, eliminated expenses are $181,960 and continuing expenses are $644,440.
2.
To prepare:
2.

Explanation of Solution
Given below is the
Annual income statement | ||||
Particulars | Amount ($) | |||
Sales | 700,000 | |||
Less: Cost of goods sold | 461,300 | |||
Gross profit | 238,700 | |||
Operating expenses | ||||
Advertising | 27,000 | |||
Store supplies | 5,600 | |||
Depreciation-Store equipment | 21,000 | |||
Total direct expenses | 53,600 | |||
Allocated expenses | ||||
Sales salaries | 59,800 | |||
Rent expenses | 27,600 | |||
Bad debts expenses | 21,000 | |||
Office salary | 13,000 | |||
Insurance expenses | 4,690 | |||
Miscellaneous office expense | 3,450 | |||
Total allocated expenses | 129,540 | |||
Total expenses | 183,140 | |||
Net income (loss) | 55,560 | |||
Table (2) |
Hence, forecasted net income is $55,560.
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 | 48,600 | |||
Savings of total expenses | 181,960 | |||
Loss of revenue (sales) | (175,000) | |||
Forecasted income | 55,560 | |||
Table (3) |
Hence, forecasted income reconcile with combined income at $55,560.
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Chapter 23 Solutions
CONNECT PLUS-FINANCIAL & MANAGERIAL AC
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