Reference no: EM132576464
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 $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.
Question 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.
Do not use negative signs with any of your answers below.
Elgin Flooring Company
Departmental Income Statement
For the Year Ended December 31, 2016
Carpeting Department Hard Covering Department Total
Net sales
Cost of goods sold:
Inventory, January 1, 2016
Purchases
Purchases returns
Purchases discounts
Transportation in
Cost of goods available for sale
Inventory, December 31, 2016
Cost of goods sold
Gross Profit
Traceable department expenses
Contribution to common expenses
Common expenses
Income before tax
Income tax expense
Net income
Question b. Calculate the gross profit percentage for each department. Round to the nearest whole percentage.
Carpeting department
Hard Covering department
Question 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?
Do not use negative signs with any of your answers below.
Carpeting Department Hard Covering Department Total Contr. to common exp.
Common expenses
Income before tax
Income tax expense
Net income