Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077862275
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 25, Problem 6APSA
To determine

Introduction There are two types of expenses mentioned here- Eliminated and continuing expenses. Eliminated costs are those expenses that will be closed along with the closure of the department, whereas the continuing expenses are those which will continue to be in existence even after the closure of the department.

To Determine

1. Three-column report showing total expenses, eliminated expenses and continuing expenses

2. Forecasted Annual income statement

3. To reconcile the company’s combined net income with the forecasted net income

Expert Solution & Answer
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Answer to Problem 6APSA

Solution

1. The three-column report is shown in the explanation section.

2. Forecasted annual income statement is shown in explanation section.

3.

    E D Company

    Reconciliation Statement of Combined Income with Forecasted Income

    Particulars

    Amount (in $)

    Combined net income

    37440

    Add: Eliminated expenses of Department 200

    284070

    Less: Loss in sales on Department 200

    -290000

    Forecasted net income31510


Explanation of Solution

Explanation

1. The three-column report is as follows:

    E D Company

    Analysis of expenses under elimination of Department 200

    Particulars

    Total expenses (in $)

    Eliminated Expenses (in $)

    Continuing Expenses (in $)

    Cost of goods sold

    469000

    207000

    262000

    Add: Direct Expenses

    Advertising expenses

    29000

    12000

    17000

    Store Supplies used

    7800

    3800

    4000

    Depreciation- Store equipment

    8300

    8300

    Add: Allocated Expenses

    Sales salaries

    104000

    52000

    52000

    Rent expenses

    14160

    14160

    Bad debt expense

    18000

    8100

    9900

    Other salary

    31200

    31200

    Insurance expenses

    3100

    770

    2330

    Misc. office expenses

    4000

    400

    3600

    Total expenses

    688560

    284070

    404490

2. Forecasted annual income statement is as follows:

    E D Company

    Forecasted annual income statement

    Under plan to eliminate Department 200

    Particulars

    Amount (in $)

    Amount (in $)

    Sales

    436000

    Less: Cost of goods sold

    262000

    Gross Profit(A)

    174000

    Add: Direct Expenses

    Advertising expenses

    17000

    Store Supplies used

    4000

    Depreciation- Store equipment

    8300

    Sales salaries

    67600

    Rent expenses

    14160

    Bad debt expense

    9900

    Other salary

    15600

    Insurance expenses

    2330

    Misc. office expenses

    3600

    Total expenses(B)

    142490

    Net Income (A-B)

    31510

Note: The revised salaries are calculated by adding the salaries of sales clerks, the salaries of administrative worker and of those reassigned to sales.

    ParticularsTotal salaries(in$)Sales salaries (in $)Office Salary (in $)
    Sales - Clerks

    52000

    52000

     

    Administrative worker

    31200

    0

    31200

    Reassignment of Administrative Worker to sales

     

    15600

    -15600

    Revised salaries

    83200

    67600

    15600

3. The reconciliation of company’s net income with the forecasted income is as follows:

    E D Company
    Reconciliation Statement of Combined Income with Forecasted Income

    ParticularsAmount (in $)
    Combined net income

    37440

    Add: Eliminated expenses of Department 200

    284070

    Less: Loss in sales on Department 200

    -290000

    Forecasted net income31510

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Chapter 25 Solutions

Fundamental Accounting Principles -Hardcover

Ch. 25 - Prob. 11DQCh. 25 - Prob. 12DQCh. 25 - Prob. 13DQCh. 25 - Prob. 14DQCh. 25 - Prob. 15DQCh. 25 - Prob. 1QSCh. 25 - Prob. 2QSCh. 25 - Prob. 3QSCh. 25 - Prob. 4QSCh. 25 - Prob. 5QSCh. 25 - Prob. 6QSCh. 25 - Prob. 7QSCh. 25 - Prob. 8QSCh. 25 - Prob. 9QSCh. 25 - Prob. 10QSCh. 25 - Prob. 11QSCh. 25 - Prob. 12QSCh. 25 - Prob. 13QSCh. 25 - Prob. 14QSCh. 25 - Relevant costs C1 Label each of the following...Ch. 25 - Prob. 16QSCh. 25 - Prob. 17QSCh. 25 - Prob. 18QSCh. 25 - Prob. 19QSCh. 25 - Sell or process further Al Holmes Company produces...Ch. 25 - Prob. 21QSCh. 25 - Prob. 22QSCh. 25 - Prob. 23QSCh. 25 - Prob. 24QSCh. 25 - Prob. 25QSCh. 25 - Prob. 26QSCh. 25 - Prob. 27QSCh. 25 - Prob. 1ECh. 25 - Prob. 2ECh. 25 - Prob. 3ECh. 25 - Prob. 4ECh. 25 - Prob. 5ECh. 25 - Prob. 6ECh. 25 - Prob. 7ECh. 25 - Prob. 8ECh. 25 - Prob. 9ECh. 25 - Prob. 10ECh. 25 - Prob. 11ECh. 25 - Prob. 12ECh. 25 - Prob. 13ECh. 25 - Prob. 14ECh. 25 - Prob. 15ECh. 25 - Exercise 25-16 Relevant costs C1 Complete the...Ch. 25 - Prob. 17ECh. 25 - Prob. 18ECh. 25 - Prob. 19ECh. 25 - Prob. 20ECh. 25 - Prob. 21ECh. 25 - Prob. 22ECh. 25 - Prob. 23ECh. 25 - Prob. 24ECh. 25 - Prob. 25ECh. 25 - Prob. 26ECh. 25 - Prob. 27ECh. 25 - Prob. 1APSACh. 25 - Prob. 2APSACh. 25 - Prob. 3APSACh. 25 - Prob. 4APSACh. 25 - Prob. 5APSACh. 25 - Prob. 6APSACh. 25 - Prob. 1BPSBCh. 25 - Prob. 2BPSBCh. 25 - Prob. 3BPSBCh. 25 - Prob. 4BPSBCh. 25 - Prob. 5BPSBCh. 25 - Prob. 6BPSBCh. 25 - Prob. 25SPCh. 25 - Prob. 1BTNCh. 25 - Prob. 2BTNCh. 25 - Prob. 3BTNCh. 25 - Payback period, accounting rate of return, net...Ch. 25 - Many companies must determine whether to...Ch. 25 - BTN 25-6 Break into teams and identify four...Ch. 25 - Prob. 7BTNCh. 25 - Prob. 8BTNCh. 25 - Access Samsung's 2013 Corporate Sustainability...
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