Reference no: EM132717764

Problem - Championship Sports Inc. 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, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:

Sales-Winter Sports Division $8,900,000

Sales-Summer Sports Division 16,400,000

Cost of Goods Sold-Winter Sports Division 5,000,000

Cost of Goods Sold-Summer Sports Division 9,000,000

Sales Expense-Winter Sports Division 650,000

Sales Expense-Summer Sports Division 1,200,000

Administrative Expense-Winter Sports Division 800,000

Administrative Expense-Summer Sports Division 1,450,000

Advertising Expense 1,090,000

Transportation Expense 192,000

Accounts Receivable Collection Expense 68,000

Warehouse Expense 1,800,000

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

a. Advertising expense-incurred at headquarters, allocated to divisions on the basis of usage: Winter Sports Division, $375,000; Summer Sports Division, $715,000.

b. Transportation expense-allocated to divisions at a rate of $4.00 per bill of lading: Winter Sports Division, 17,500 bills of lading; Summer Sports Division, 30,500 bills of lading.

c. Accounts receivable collection expense-incurred at headquarters, allocated to divisions at a rate of $1.00 per invoice: Winter Sports Division, 25,000 sales invoices; Summer Sports Division, 43,000 sales invoices.

d. Warehouse expense-allocated to divisions on the basis of floor space used in storing division products: Winter Sports Division, 60,000 square feet; Summer Sports Division, 90,000 square feet.

Required - Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting computations for support department allocations.