Prepare a departmental income statement

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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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