Accounting #5

E-25-1A

Gross Profit Section of Departmental Income Statement Bill. Walter and Alice Jennings are partners in a business called Walters and Jennings Sportswear that sells athletic footwear. They have organized the business on a department basis as follows: running shoes, walking shoes, and specialty shoes. At the end of the first year of operation, the sales and cost of goods sold for the three departments are as follows:

Running Shoes Walking Shoes Specialty Shoes

Sales $36,000 $42,000 $12,000

Cost of goods sold 23,400 23,520 7,600

Prepare the gross profit section of a department income statement for the year ended December 31, 20-. Show the gross profit for each department and for the business in total.

P 25-9A

Income Statement With Departmental Direct Operating Margin and Total Operating Income. Durwood Thomas operates the Business Thomas Security that sells security equipment for commercial property and residential homes. The following information is provided for the year ended December 31, 20-.

Commercial Residential

Property Homes

Net sales $465,000 $135,000

Cost of goods sold 279,250 54,000

Direct operating expenses:

Advertising expense 35,000 20,000

Store clerk’s wages expense 30,000 18,000

Truck drivers’ wages expense 15,000 15,000

Bad debt expense 8,000 3,000

Depreciation expense delivery equipment 6,000 4,000

Other operating expenses 20,000 10,000

Indirect operating expenses:

Store clerks’ wages expense 10,000

Advertising expense 15,000

Store rent expense 20,000

Other operating expenses 10,000

Required:

1. Prepare an income statement showing department direct operating margin and total operating income.

2. Calculate department direct operating margin percentages.

P 25-9B

Income Statement with Departmental Direct Operating Margin and Total Operating Income. Tom Peterson owns the business Peterson’s Furniture and Appliances. The following information is provided for the year ended December 31, 20-.

Furniture Appliances

Department Department

Net sales $390,000 $810,000

Cost of goods sold 234,000 405,000

Direct operating expenses:

Advertising expense 30,000 60,000

Store clerks’ expense 40,000 90,000

Truck drivers’ wages expense 35,000 65,000

Depreciation expense delivery equipment 4,000 8,000

Bad Debt expense 4,000 9,000

Other operating expenses 15,000 50,000

Indirect operating expenses:

Store clerks’ wages expense $20,000

Advertising expense 15,000

Store rent expense 50,000

Other operating expenses 25,000

Required:

1. Prepare an income statement showing departmental direct operating margin and total operating income.

2. Calculate departmental direct operating margin percentages.