Question

Departmental Income Statement
Elgin Flooring Company sells floor coverings through two departments, carpeting and hard covering (tile and linoleum). Operating information for 2016 appears below.

				Carpeting Department	Hard Covering Department
Inventory, January 1, 2016				$71,000	$37,000
Inventory, December 31, 2016				39,000	19,000
Net sales				780,000	480,000
Purchases				484,000	362,000
Purchases returns				28,000	8,000
Purchases discounts				16,000	4,000
Transporation in				18,000	14,000
Traceable departmental expenses				96,000	44,000

Common operating expenses of the firm were $120,000.

a. Prepare a departmental income statement showing departmental contribution to common expenses and net income of the firm. Assume an overall effective income tax rate of 35%. Elgin uses a periodic inventory system.

Do not use negative signs with any of your answers below.

Elgin Flooring Company Departmental Income Statement For the Year Ended December 31, 2016
				Carpeting Department	Hard Covering Department	Total
Net sales				Answer	Answer	Answer
Cost of goods sold:
Inventory, January 1, 2016				Answer	Answer	Answer
Purchases				Answer	Answer	Answer
Purchases returns				Answer	Answer	Answer
Purchases discounts				Answer	Answer	Answer
Transportation in				Answer	Answer	Answer
Cost of goods available for sale				Answer	Answer	Answer
Inventory, December 31, 2016				Answer	Answer	Answer
Cost of goods sold				Answer	Answer	Answer
Gross Profit				Answer	Answer	Answer
Traceable department expenses				Answer	Answer	Answer
Contribution to common expenses				Answer	Answer	Answer
Common expenses						Answer
Income before tax						Answer
Income tax expense						Answer
Net income						Answer

b. Calculate the gross profit percentage for each department.

Round to the nearest whole percentage.

Carpeting department

Answer%

Hard Covering department

Answer%

c. If the common expenses were allocated 70% to the carpeting department and 30% to the hard covering department, what would the net income be for each department?

Do not use negative signs with any of your answers below.

				Carpeting Department	Hard Covering Department	Total
Contribution to common expenses				Answer	Answer	Answer
Common expenses				Answer	Answer	Answer
Income before tax				Answer	Answer	Answer
Income tax expense				Answer	Answer	Answer
Net income				Answer

Answer 1

Departmental Income statement
	Carpeting department	Hard covering department	Total
Net sales	780000	480000	1260000
cost of goods sold:			0
inventory january 1 2016	71000	37000	108000
purchases	484000	362000	846000
Purchase return	28000	8000	36000
purchases discount	16000	4000	20000
transportation in	18000	14000	32000
cost of goods available for sale	529000	401000	930000
inventory december 31 2016	39000	19000	58000
Cost of goods sold	490000	382000	872000
Gross profit	290000	98000	388000
traceable department exp	96000	44000	140000
contribution expenses	194000	54000	248000
common expenses			120000
income before tax			128000
income tax expenses			44800
net income			83200
Gross profit % = Gross profit/sale	37%	20%
b)	Carpeting department	Hard covering department	Total
Contribution to common expenses	194000	54000	248000
common expense	84000	36000	120000
income before tax	110000	18000	128000
income tax expenses	38500	6300	44800
net income	71500	11700	83200

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