Chapter 10, Problem 9E

Championship Sports Inc. 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:

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

a. Advertising expense—incurred at headquarters, allocated to divisions on the basis of usage: Winter Sports Division, $375,000; Summer Sports Division, $715,000.

b. Transportation expense—allocated to divisions at a rate of $4.00 per bill of lading: Winter Sports Division, 17,500 bills of lading; Summer Sports Division, 30,500 bills of lading.

c. Accounts receivable collection expense—incurred at headquarters, allocated to divisions at a rate of $1.00 per invoice: Winter Sports Division, 25,000 sales invoices; Summer Sports Division, 43,000 sales invoices.

d. Warehouse expense—allocated to divisions on the basis of floor space used in storing division products: Winter Sports Division, 60,000 square feet; Summer Sports Division, 90,000 square feet.

Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Provide supporting computations for support department allocations.