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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:5. XPac 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, 2020, the end of
the fiscal year, after all adjustments, including those for
inventories, were recorded and posted:
Revenue/Expense
Dollar Amount
Sales-Winter Sports Division
$11,250,000
Sales-Summer Sports Division
Cost of Goods Sold-Winter Sports Division
13,750,000
6,100,000
Cost of Goods Sold-Summer Sports Division
7,777,000
1,680,000
1,840,000
Sales ExpenseWinter Sports Division
Sales ExpenseSummer Sports Division
Administrative Expense-Winter Sports Division
Administrative Expense-Summer Sports Division
Advertising Expense
Transportation Expense
Accounts Receivable Collection Expense
Warehouse Expense
1,900,000
1,210,000
480,000
240,000
123,000
1,300,000
The bases to be used in allocating expenses, together with other
essential information, are as follows:
I. Advertising expense-incurred at headquarters, charged
back to divisions on the basis of usage: Winter Sports
Division, $216,900; Summer Sports Division, $265,100.
II. Transportation expense-charged back to divisions at a
charge rate of $8.00 per bill of lading: Winter Sports
Division, 14,400 bills of lading; Summer Sports Division,
15,600 bills of lading.
III. Accounts receivable collection expense-incurred at
headquarters, charged back to divisions at a charge rate of
$5.00
per
invoice: Winter Sports Division, 9,640 sales
invoices; Summer Sports Division, 14,460 sales invoices.
IV. 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, 106,000 square feet.
Prepare a divisional income statement with two column
headings: Winter Sports Division and Summer Sports
Division. Provide supporting calculations for service
department charges.
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