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:

Sales—Winter Sports Division	$10,505,000
Sales—Summer Sports Division	13,610,000
Cost of Goods Sold—Winter Sports Division	6,260,000
Cost of Goods Sold—Summer Sports Division	7,878,000
Sales expense—Winter Sports Division	1,665,000
Sales expense—Summer Sports Division	1,884,000
Administrative Expense—Winter Sports Division	1,018,000
Administrative Expense—Summer Sports Division	1,209,600
Advertising Expense	477,700
Transportation Expense	220,800
Accounts Receivable Collection Expense	120,900
Warehouse Expense	1,164,000

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

A.	Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $217,100; Summer Sports Division, $260,600.
B.	Transportation expense—charged back to divisions at a charge rate of $8 per bill of lading: Winter Sports Division, 12,300 bills of lading; Summer Sports Division, 15,300 bills of lading.
C.	Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $5 per invoice: Winter Sports Division, 9,680 sales invoices; Summer Sports Division, 14,500 sales invoices.
D.	Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 92,000 square feet; Summer Sports Division, 102,000 square feet.

	Required:
1.	Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.)
2.	Provide supporting calculations for service department charges.

1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.)

GLADES SPORTING GOODS CO.

Divisional Income Statements

1	__________Label___________	Winter Sports Division	Summer Sports Division
2		_______________	______________________
3
4
5
6
7
8
9
10
11
12
13
14
15

2. Provide supporting calculations for service department charges.

Service Department Charges
	Winter Sports Division	Summer Sports Division	Total
Advertising expense	___________	_____________	________________
Transportation rate per bill of lading	___________	____________
× Number of bills of lading	__________	____________
Transportation expense	____________	____________	___________
Accounts receivable collection rate	_____________	_____________
× Number of sales invoices	____________	_____________
Accounts receivable collection expense	____________	_____________	_____________
Warehouse rate per sq. ft.	___________	____________
× Number of square feet	_____________	___________
Warehouse expense	__________	____________	____________

Answer 1