Glades Sporting Goods Co. operates two divisions—the Winter Sports Division and

Question

Glades Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:

The bases to be used in allocating expenses, together with other essential information, are as follows:

Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000.

Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading.

Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices.

Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 square feet.

Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required.

Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.

Check My Work3 more Check My Work uses remaining.

Sales—Winter Sports Division $12,600,000 Sales—Summer Sports Division 16,300,000 Cost of Goods Sold—Winter Sports Division 7,560,000 Cost of Goods Sold—Summer Sports Division 9,454,000 Sales Expense—Winter Sports Division 2,016,000 Sales Expense—Summer Sports Division 2,282,000 Administrative Expense—Winter Sports Division 1,260,000 Administrative Expense—Summer Sports Division 1,450,700 Advertising Expense 578,000 Transportation Expense 265,660 Accounts Receivable Collection Expense 174,000 Warehouse Expense 1,540,000

Explanation / Answer

Workings

In respect of warehouse, rate per sq.ft was computed as 1540000 / 220000 = 7 per sq.ft

                    DIVISIONAL INCOME STATEMENT Winter sports division Summer Sports division Sales 12,600,000 16,300,000 Cost of goods sold 7560000 9454000 Gross profit 5,040,000 6,846,000 Divisional selling expenses 2016000 2282000 Divisional administrative 1,260,000 1,450,700 Operating expenses 3276000 3732700 Income from operations before service department charges 1,764,000 3,113,300 Less service department Advertising 252000 326000 Transportation 127280 138380 Accounts receivbales collection 69000 105000 Warehouse expenses 714000 826000 Total 1162280 1395380 Income from operations 601,720 1,717,920

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