X-Out Sporting Goods Co. operates two divisionsthe Action Sports Division and the Team Sports Division. The following

Question:

X-Out Sporting Goods Co. operates two divisions—the Action Sports Division and the Team Sports Division. The following income and expense accounts were provided as of June 30, 2010, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded:

Sales—Action Sports (AS) Division ………………….......…… $14,500,000

Sales—Team Sports (TS) Division …………………….......……. 17,600,000

Cost of Goods Sold—Action Sports (AS) Division …………. 8,700,000

Cost of Goods Sold—Team Sports (TS) Division ………….. 10,208,000

Sales Expense—Action Sports (AS) Division ……………..…. 2,320,000

Sales Expense—Team Sports (TS) Division …………………. 2,464,000

Administrative Expense—Action Sports (AS) Division ….…... 1,450,000

Administrative Expense—Team Sports (TS) Division ……..… 1,566,400

Advertising Expense ………………………………………….............…. 642,000

Transportation Expense ……………………………………...........…… 314,960

Accounts Receivable Collection Expense …………….....………… 201,750

Warehouse Expense ………………………………………..........…… 1,600,000

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

(a) Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Action Sports Division, $256,800; Team Sports Division, $385,200.

(b) Transportation expense—charged back to divisions at a charge rate of $12.40 per bill of lading: Action Sports Division, 12,000 bills of lading; Team Sports Division, 13,400 bills of lading.

(c) Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $7.50 per invoice: Action Sports Division, 12,400 sales invoices; Team Sports Division, 14,500 sales invoices.

(d) Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Action Sports Division, 120,000 square feet; Team Sports Division, 80,000 square feet.

Prepare a divisional income statement with two column headings: Action Sports Division and Team Sports Division. Provide supporting schedules for determining service department charges.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...