Solution-Prepare a departmental income statement

Prepare a departmental income statement

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Reference no: EM133074913

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	$74,000	$40,000
Inventory, December 31, 2016	36,000	16,000
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	93,000	41,000

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

Required -

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.

c. If the common expenses were allocated 80% to the carpeting department and 20% to the hard covering department, what would the net income be for each department?

Reference no: EM133074913

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Prepare a departmental income statement

Reference no: EM133074913

Reference no: EM133074913

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