Perkins Appliance & Furniture Company has two departments, appliances, and furniture. Operating information for 2016 appears below.
Question:
Perkins Appliance & Furniture Company has two departments, appliances, and furniture. Operating information for 2016 appears below.
Alliance Department | Furniture Department | ||||
---|---|---|---|---|---|
Inventory, January 1, 2016 | $120,000 | $90,000 | |||
Inventory, December 31, 2016 | 75,600 | 48,000 | |||
Net sales | 1,120,000 | 760,000 | |||
Purchases | 640,000 | 480,000 | |||
Purchases discounts | 8,000 | 6,000 | |||
Transportation in | 18,000 | 16,000 | |||
Traceable departmental expenses | 199,600 | 82,000 |
The common operating expenses of the firm were $180,000.
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 40%. Perkins uses a periodic inventory system.
Do not use negative signs with any of your answers below.
Perkins Appliance & Furniture Company Departmental Income Statement For the Year Ended December 31, 2016 | ||||||
---|---|---|---|---|---|---|
Appliance Department | Furniture Department | Total | ||||
Net sales | $Answer | $Answer | $Answer | |||
Cost of goods sold: | ||||||
Inventory, January 1, 2016 | Answer | Answer | Answer | |||
Purchases | Answer | Answer | Answer | |||
Purchases discounts | Answer | Answer | Answer | |||
Transportation in | Answer | Answer | Answer | |||
Cost of goods available for sale | Answer | Answer | Answer | |||
Inventory, December 31, 2016 | Answer | Answer | Answer | |||
Cost of goods sold | Answer | Answer | Answer | |||
Gross Profit | Answer | Answer | Answer | |||
Traceable department expenses | Answer | Answer | Answer | |||
Contribution to common expenses | Answer | Answer | Answer | |||
Common expenses | Answer | |||||
Income before tax | Answer | |||||
Income tax expense | Answer | |||||
Net income | $Answer |
b. Calculate the gross profit percentage for each department.
Round to the nearest whole percentage.
Appliance department
Answer%
Furniture department
Answer%
c. If the common expenses were allocated 70% to the appliance department and 30% to the furniture department, what would the net income be for each department?
Do not use negative signs with any of your answers below.
Appliance Department | Furniture Department | Total | ||||
---|---|---|---|---|---|---|
Contribution to common expenses | $Answer | $Answer | $Answer | |||
Common expenses | Answer | Answer | Answer | |||
Income before tax | Answer | Answer | Answer | |||
Income tax expense | Answer | Answer | Answer | |||
Net income | $Answer | $Answer | $Answer |
Introduction to Finance Markets Investments and Financial Management
ISBN: 978-1118492673
15th edition
Authors: Melicher Ronald, Norton Edgar