Reference no: EM131786703

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.

Inventory, January 1, 2016	$65,000	$31,000
Inventory, December 31, 2016	45,000	25,000
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	104,000	52,000

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.

b. Calculate the gross profit percentage for each department.

Round to the nearest whole percentage.

Carpeting department

Hard Covering department

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?