Glades 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, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales—Winter Sports Division $12,600,000 Sales—Summer Sports Division 16,300,000 Cost of Goods Sold—Winter Sports Division 7,560,000 Cost of Goods Sold—Summer Sports Division 9,454,000 Sales Expense—Winter Sports Division 2,016,000 Sales Expense—Summer Sports Division 2,282,000 Administrative Expense—Winter Sports Division 1,260,000 Administrative Expense—Summer Sports Division 1,450,700 Advertising Expense 578,000 Transportation Expense 265,660 Accounts Receivable Collection Expense 174,000 Warehouse Expense 1,540,000   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, $252,000; Summer Sports Division, $326,000. B. Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading. C. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices. D. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 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. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.) 2. Provide supporting calculations for service department charges. Labels   For the Year Ended December 31, 20Y8   For the Month Ended December 31, 20Y8   Service department charges   Amount Descriptions   Accounts receivable collection expense   Advertising expense   Cost of goods sold   Divisional administrative expenses   Divisional selling expenses   Gross profit   Income from operations   Income from operations before service department charges   Sales   Total divisional expenses   Total service department charges   Transportation expense   Warehouse expense   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. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.)   GLADES SPORTING GOODS CO. Divisional Income Statements   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

Question
Glades 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, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:
Sales—Winter Sports Division $12,600,000
Sales—Summer Sports Division 16,300,000
Cost of Goods Sold—Winter Sports Division 7,560,000
Cost of Goods Sold—Summer Sports Division 9,454,000
Sales Expense—Winter Sports Division 2,016,000
Sales Expense—Summer Sports Division 2,282,000
Administrative Expense—Winter Sports Division 1,260,000
Administrative Expense—Summer Sports Division 1,450,700
Advertising Expense 578,000
Transportation Expense 265,660
Accounts Receivable Collection Expense 174,000
Warehouse Expense 1,540,000
 
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, $252,000; Summer Sports Division, $326,000.
B. Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading.
C. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices.
D. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 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. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.)
2. Provide supporting calculations for service department charges.
Labels  
For the Year Ended December 31, 20Y8  
For the Month Ended December 31, 20Y8  
Service department charges  
Amount Descriptions  
Accounts receivable collection expense  
Advertising expense  
Cost of goods sold  
Divisional administrative expenses  
Divisional selling expenses  
Gross profit  
Income from operations  
Income from operations before service department charges  
Sales  
Total divisional expenses  
Total service department charges  
Transportation expense  
Warehouse expense  
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. “Less” or “Plus” and colons will automatically appear if it is required. Be sure to complete the statement heading. (You may find it useful to work the Supporting Calculations first.)
 
GLADES SPORTING GOODS CO.
Divisional Income Statements
 
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
 
 
 

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