Question

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, 2016, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:

Sales:
—Winter Sports Division	$10,540,000
—Summer Sports Division	13,605,000
Cost of Goods Sold:
—Winter Sports Division	6,290,000
—Summer Sports Division	7,838,000
Sales expense:
—Winter Sports Division	1,655,000
—Summer Sports Division	1,902,000
Administrative Expense:
—Winter Sports Division	1,009,000
—Summer Sports Division	1,205,800
Advertising Expense	477,300
Transportation Expense	164,400
Accounts Receivable Collection Expense	120,300
Warehouse Expense	980,000

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: Winter Sports Division, $216,200; Summer Sports Division, $261,100.
B.	Transportation expense—charged back to divisions at a charge rate of $6 per bill of lading: Winter Sports Division, 12,300 bills of lading; Summer Sports Division, 15,100 bills of lading.
C.	Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $5 per invoice: Winter Sports Division, 9,650 sales invoices; Summer Sports Division, 14,410 sales invoices.
D.	Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 94,000 square feet; Summer Sports Division, 102,000 square feet.

	Required:
1.	Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. (You may find it useful to work the Supporting Calculations first.)
2.	Provide supporting calculations for service department charges. 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, 2016, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales: —Winter Sports Division $10,540,000 —Summer Sports Division 13,605,000 Cost of Goods Sold: —Winter Sports Division 6,290,000 —Summer Sports Division 7,838,000 Sales expense: —Winter Sports Division 1,655,000 —Summer Sports Division 1,902,000 Administrative Expense: —Winter Sports Division 1,009,000 —Summer Sports Division 1,205,800 Advertising Expense 477,300 Transportation Expense 164,400 Accounts Receivable Collection Expense 120,300 Warehouse Expense 980,000 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: Winter Sports Division, $216,200; Summer Sports Division, $261,100. B. Transportation expense—charged back to divisions at a charge rate of $6 per bill of lading: Winter Sports Division, 12,300 bills of lading; Summer Sports Division, 15,100 bills of lading. C. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $5 per invoice: Winter Sports Division, 9,650 sales invoices; Summer Sports Division, 14,410 sales invoices. D. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 94,000 square feet; Summer Sports Division, 102,000 square feet. Required: 1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. (You may find it useful to work the Supporting Calculations first.) 2. Provide supporting calculations for service department charges. X Divisional Income Statements 1. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. (You may find it useful to work the Supporting Calculations first.) XSPORT SPORTING GOODS CO. Divisional Income Statements For the Year Ended December 31, 2016 1 Winter Sports Division Summer Sports Division 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2. Provide supporting calculations for service department charges. Service Department Charges 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 Divisonal Income Statements For the Year Ended December 31, 2016 Winters Sports Division 10,540,000 $ 6,290,000 4,250,000 $ Summer Sports Divison 13,605,000 7,838,000 5,767,000 Sales (a) Cost of goods sold (b) Gross Profit [c (a-b)] Divisional selling and administrative expenses Divisional selling expenses (d) Divisional administrative expenses (e) Total divisional selling and administrative expenses (f d+e) Income from operations before service department charges (g -c-f) Service department charges Advertising expense (h) Transportation expense (i) Accounts receivable collection expense (i) Warehouse expense (k) Total Service department Charges (Ihtitj+k) Income from operations (g-l) 1,655,000 $ 1,009,000 2,664,000 $ 1,586,000 $ 1,902,000 1,205,800 3,107,800 2,659,200 216,200$ 261,100 90,600 72,050 510,000 933,750 1,725,450 73,800 48,250 470,000 808,250 $ 777,750 $

XSport Sporting Goods Co Service Department Charges For the Year Ended December 31, 2016 Winters Sports Division Summer Sports Divison Total Advertising expense 216,200$ 261,100$ 477,300 Transportation rate per bill of lading x Number of bills of lading Transportation expense 12,300 73,800$ 15,100 90,600 164,400 Accounts receivable collection rate x Number of sales invoices Accounts receivable collection expense 9,650 48,250$ 14,410 72,050 $ 120,300 Warehouse rate per sq.ft. x Number of square foot Warehouse expense 94,000 470,000 $ 102,000 510,000$ 980,000 Calculation Warehouse rate per sq.ft Total Square foot Winter sports division Summer sports divison 94,000 102,000 196,000 980,000 Total Warehouse expense Warehouse rate per sq.ft. (2,880,000 360,000) 5.00 per square foot