In: Accounting
Departmental Income Statement
Perkins Appliance & Furniture Company has two departments,
appliances and furniture. Operating information for 2016 appears
below.
Alliance Department | Furniture Department | ||||
---|---|---|---|---|---|
Inventory, January 1, 2016 | $146,000 | $116,000 | |||
Inventory, December 31, 2016 | 49,600 | 22,000 | |||
Net sales | 1,120,000 | 760,000 | |||
Purchases | 640,000 | 480,000 | |||
Purchases discounts | 8,000 | 6,000 | |||
Transporation in | 18,000 | 16,000 | |||
Traceable departmental expenses | 179,600 | 62,000 |
Common operating expenses of the firm were $180,000.
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 40%. Perkins uses a periodic inventory system.
Do not use negative signs with any of your answers below.
Perkins Appliance &
Furniture Company Departmental Income Statement For the Year Ended December 31, 2016 |
||||||
---|---|---|---|---|---|---|
Appliance Department | Furniture Department | Total | ||||
Net sales | $Answer | $Answer | $Answer | |||
Cost of goods sold: | ||||||
Inventory, January 1, 2016 | Answer | Answer | Answer | |||
Purchases | 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.
Appliance department
Answer
%
Furniture department
Answer
%
c. If the common expenses were allocated 70% to the appliance department and 30% to the furniture department, what would the net income be for each department?
Do not use negative signs with any of your answers below.
Appliance Department | Furniture 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 | $Answer |
Solution a:
Perkins Appliances and Furniture Company | |||
Departmental Income statement | |||
For the year ended December 31, 2016 | |||
Particulars | Appliance deparment | Furniture department | Total |
Net Sales | $1,120,000.00 | $760,000.00 | $1,880,000.00 |
Cost of goods sold: | |||
Inventory, Jan1, 2016 | $146,000.00 | $116,000.00 | $262,000.00 |
Purchases | $640,000.00 | $480,000.00 | $1,120,000.00 |
Purchase discounts | -$8,000.00 | -$6,000.00 | -$14,000.00 |
Transporation In | $18,000.00 | $16,000.00 | $34,000.00 |
Cost of goods available for sale | $796,000.00 | $606,000.00 | $1,402,000.00 |
Inventory, Dec 31, 2016 | -$49,600.00 | -$22,000.00 | -$71,600.00 |
Cost of goods sold | $746,400.00 | $584,000.00 | $1,330,400.00 |
Gross Profit | $373,600.00 | $176,000.00 | $549,600.00 |
Traceble department expenses | $179,600.00 | $62,000.00 | $241,600.00 |
Contribution to common expenses | $194,000.00 | $114,000.00 | $308,000.00 |
common expenses | $180,000.00 | ||
Income before tax | $128,000.00 | ||
Income tax expense (40%) | $51,200.00 | ||
Net Income | $76,800.00 |
Solution b:
Gross profit percentage = Gross profit / Net Sales
Appliance department = $373,600 / $1,120,000 = 33%
Furniture department = $176,000 / $760,000 = 23%
Solution c:
Perkins Appliances and Furniture Company | |||
Departmental Income statement | |||
For the year ended December 31, 2016 | |||
Particulars | Appliance deparment | Furniture department | Total |
Contribution to common expenses | $194,000.00 | $114,000.00 | $308,000.00 |
common expenses | $126,000.00 | $54,000.00 | $180,000.00 |
Income before tax | $68,000.00 | $60,000.00 | $128,000.00 |
Income tax expense (40%) | $27,200.00 | $24,000.00 | $51,200.00 |
Net Income | $40,800.00 | $36,000.00 | $76,800.00 |