Problem 22-3A Departmental income statements; forecasts LO P3 Williams Company b

Question

Problem 22-3A Departmental income statements; forecasts LO P3 Williams Company began operations in January 2015 with two operating (selling) departments and one service (office) department. Its departmental income statements follow WILLIAMS COMPANY Departmental Income Statements For Year Ended December 31, 2015 Mirror Combined Clock 68,600 52,700 121,300 71,400 32,300 103,700 Sales 140,000 $ 85,000 $225,000 Cost of goods sold Gross proft Direct expenses Sales salaries Advertising Store supplies used Depreciation-Equipment 20,000 2,000 ,200 1,700600 2,300 8,600 28,600 800 2,800 300 1,500 Total direct expenses 24,900 10,300 35,200 Allocated expenses Rent expense Utilities expense Share of office department expenses 3,000 11,500 7,040 3,540 10,580 2,000 5,000 5,000 16,500 Total allocated expenses 21,540 10,540 32,080 Total expenses 46,440 20,840 67,280 Net income 24,960 $11,460 $ 36,420

Explanation / Answer

WILLIAMS COMPANY Forecasted Departmental Income Statements For Year Ended December 31, 2016 Clock Mirror Paintings Combined Sales (1) $152,600.00 $92,650.00 $49,000.00 $294,250.00 Less: Cost of goods sold (2) $74,774.00 $57,443.00 $22,050.00 $154,267.00 Gross profit $77,826.00 $35,207.00 $26,950.00 $139,983.00 Direct expenses Sales salaries $20,000.00 $8,600.00 $6,500.00 $35,100.00 Advertising $2,000.00 $800.00 $1,100.00 $3,900.00 Store supplies used (3) $1,308.00 $327.00 $600.00 $2,235.00 Depreciation of equipment $1,700.00 $600.00 $400.00 $2,700.00 Total direct expenses $25,008.00 $10,327.00 $8,600.00 $43,935.00 Allocated expenses Rent expense (4) $5,632.00 $2,655.00 $2,293.00 $10,580.00 Utilities expense (4) $2,661.63 $1,254.73 $1,083.65 $5,000.00 Share of office dept. expenses (5) $12,602.14 $7,651.30 $4,046.56 $24,300.00 Total allocated expenses $20,895.77 $11,561.03 $7,423.21 $39,880.00 Total expenses $45,903.77 $21,888.03 $16,023.21 $83,815.00 Net income $31,922.23 $13,318.97 $10,926.79 $56,168.00 Notes 1 Clock Mirror Paintings Combined 2015 Sales $140,000.00 $85,000.00 Growth rate (9% increase) x 109% x 109% 2016 sales $152,600.00 $92,650.00 $49,000.00 $294,250.00 Notes 2 Clock Mirror Paintings Combined 2015 COGS $68,600.00 $52,700.00 $49,000.00 Growth rate (9% increase) x 109% x 109% x 45% 2016 COGS $74,774.00 $57,443.00 $22,050.00 $154,267.00 Cost of good sold for Paintings = 1- 55% GM 45.00% COGS Notes 3 Clock Mirror Paintings Combined 2015 Store Supplies $1,200.00 $300.00 Growth rate (9% increase) x 109% x 109% 2016 COGS $1,308.00 $327.00 $600.00 $2,235.00 Notes 4 Rent and Utilities Clock Mirror Paintings Combined 2015 Rent $7,040.00 $3,540.00 Allocated One-fifth from clock to paintings -1408 1408 Allocated One-fourth from Mirror to Paintings -885 885 Total Rent $5,632.00 $2,655.00 2293 $10,580.00 Utilities 2016 allocation of $10,580 rent 53.23% 25.09% 21.67% 100.00% 2016 allocation of $5,000 Total utilities $2,661.63 $1,254.73 $1,083.65 $5,000.00 Note 5 (Office Department Expenses) Clock Mirror Paintings Combined 2016 sales $152,600.00 $92,650.00 $49,000.00 $294,250.00 Percent of total sales 51.86% 31.49% 16.65% 100.00% 2016 allocation of $24,300 total office department expenses($16,500 in 2015 + $7,800 increase) $12,602.14 $7,651.30 $4,046.56 $24,300.00

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