Question

1. XSport Sporting Goods Co. 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	$31,185,000
   Sales—Summer Sports Division	34,452,000
   Cost of Goods Sold—Winter Sports Division	18,711,000
   Cost of Goods Sold—Summer Sports Division	19,899,000
   Sales Expense—Winter Sports Division	5,346,000
   Sales Expense—Summer Sports Division	4,752,000
   Administrative Expense—Winter Sports Division	3,118,500
   Administrative Expense—Summer Sports Division	3,059,100
   Advertising Expense	884,000
   Transportation Expense	511,200
   Accounts Receivable Collection Expense	191,100
   Warehouse Expense	2,970,000

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

   1. Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $415,000; Summer Sports Division, $469,000.
   2. Transportation expense—charged back to divisions at a charge rate of $18 per bill of lading: Winter Sports Division, 13,500 bills of lading; Summer Sports Division, 14,900 bills of lading.
   3. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $7 per invoice: Winter Sports Division, 12,600 sales invoices; Summer Sports Division, 14,700 sales invoices.
   4. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 160,000 square feet; Summer Sports Division, 200,000 square feet.

   Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim calculations.

   XSport Sporting Goods Co.
   Divisional Income Statements
   For the Year Ended December 31, 20Y9
   	Winter Sports Division	Summer Sports Division
   Sales	$	$
   Cost of goods sold
   Gross profit	$	$
   Divisional selling and administrative expenses:
   Divisional selling expenses	$	$
   Divisional administrative expenses
   Total divisional selling and administrative expenses	$	$
   Income from operations before service department charges	$	$
   Service department charges:
   Advertising expense	$	$
   Transportation expense
   Accounts receivable collection expense
   Warehouse expense
   Total service department charges	$	$
   Income from operations	$	$

   Provide supporting schedules for determining service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.

   XSport Sporting Goods Co.
   Service Department Charges
   For the Year Ended December 31, 20Y9
   	Winter Sports Division	Summer Sports Division	Total
   Advertising expense	$	$	$
   Transportation rate per bill of lading	$	$
   Number of bills of lading
   Transportation expense	$	$	$
   Accounts receivable collection rate	$	$
   Number of sales invoices
   Accounts receivable collection expense	$	$	$
   Warehouse rate per sq. ft.	$	$
   Number of square feet
   Warehouse expense	$	$

Answer 1

XSport Sporting Goods Co.
Divisional Income Statements
For the Year Ended December 31, 20Y9
	Winter Sports Division	Summer Sports Division
Sales	31185000	34452000
Cost of goods sold	18711000	19899000
Gross profit	12474000	14553000
Divisional selling and administrative expenses:
Divisional selling expenses	5346000	4752000
Divisional administrative expenses	3118500	3059100
Total divisional selling and administrative expenses	8464500	7811100
Income from operations before service department charges	4009500	6741900
Service department charges:
Advertising expense	415000	469000
Transportation expense	243000	268200
Accounts receivable collection expense	88200	102900
Warehouse expense	1320000	1650000
Total service department charges	2066200	2490100
Income from operations	1943300	4251800
XSport Sporting Goods Co.
Service Department Charges
For the Year Ended December 31, 20Y9
	Winter Sports Division	Summer Sports Division	Total
Advertising expense	415000	469000	884000
Transportation rate per bill of lading	18	18
Number of bills of lading	13500	14900
Transportation expense	243000	268200	511200
Accounts receivable collection rate	7	7
Number of sales invoices	12600	14700
Accounts receivable collection expense	88200	102900	191100
Warehouse rate per sq. ft.	8.25	8.25
Number of square feet	160000	200000
Warehouse expense	1320000	1650000	2970000