24
Departmental
Accounting
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
2. Net Sales less Cost of Goods Sold.
4. Direct expenses: Operating expenses directly traced and identified to a
5. A portion is directly traced to the department, while a portion is spent to
8. This approach only charges expenses to departments that are directly
9. The question in this case is whether Hernando should shift some of the sales
from other departments to save his friend’s job. This type of behavior is
SOLUTIONS TO CONCEPT CHECKS
1.
Toys
Clothing
Totals
Sales
2.
Bakery
Grocery
Totals
Insurance Allocated
$6,000
$24,000
3.
Net Sales
$84,000
4.
Dept. B
Total
Net Sales
$6,000
$10,000
Cost of Goods Sold
Gross Profit on Sales
$5,800
Operating Expenses:
Delivery Expense
Depreciation Expense
Total Operating Expense
$1,830
Income Tax Expense
Net Income
$2,056
5.
Dept. A
Dept. B
Total
Net Sales
$5,500
$11,200
$ 16,700
Cost of Goods Sold
2,100
5,600
7,700
Gross Profit on Sales
$3,400
$ 9,000
Direct Departmental Expenses:
Sales Salaries
Advertising Expense
1,100
Income before Tax
SOLUTIONS TO SET A EXERCISES
24A–1.
24A–2.
24A-3.
Net Sales
$82,000
Cost of Goods Sold
Operating Expense
Income Tax Expense
24A-4.
DEPT. A
DEPT. B
TOTAL
Net Sales
$210
0
0
0
00
$280
0
0
0
00
$490
0
0
0
00
Cost of Goods Sold
108
0
0
0
00
129
0
0
0
00
237
0
0
0
00
Gross Profit on Sales
$102
0
0
0
00
$151
0
0
0
00
$253
0
0
0
00
23
Income before Tax
Income Tax Expense
Net Income
6
3
5
24A–5.
DEPT. A
DEPT. B
TOTAL
Net Sales
$51
0
0
0
00
$87
0
0
0
00
$138
0
0
0
00
Cost of Goods Sold
21
0
0
0
00
38
0
0
0
00
59
0
0
0
00
Direct Departmental Expenses
6
0
0
00
9
0
0
00
5
0
0
00
5
0
0
00
8
0
0
00
3
0
0
00
Indirect Departmental Expenses
0
0
0
00
7
0
0
00
SOLUTIONS TO SET B EXERCISES
24B–1.
Jewelry
Hardware
Automotive
Totals
24B–2.
Department
Candy
Ice Cream
Pizza
Totals
Fire Insurance Expense
$51,920
$34,220
$31,860
$118,000
24B–3.
Net Sales
$78,000
Cost of Goods Sold
Income Tax Expense
24B–4.
DEPT. A
DEPT. B
TOTAL
Net Sales
$220
0
0
0
00
$350
0
0
0
00
$570
0
0
0
00
Cost of Goods Sold
104
0
0
0
00
127
0
0
0
00
231
0
0
0
00
Gross Profit on Sales
0
0
0
00
0
0
0
00
$339
0
0
0
00
Operating Expenses
23
3
0
0
00
3
0
0
00
6
0
0
00
5
0
0
00
28
6
0
0
00
1
0
0
00
0
0
0
00
23
0
0
0
00
43
0
0
0
00
Total Operating Expense
$67
8
0
0
00
$73
9
0
0
00
$141
7
0
0
00
Income before Tax
$48
2
0
0
00
1
0
0
00
$197
3
0
0
00
Income Tax Expense
1
9
0
00
Net Income
$138
1
1
0
00
24B–5.
DEPT. A
DEPT. B
TOTAL
Net Sales
$66
0
0
0
00
$81
0
0
0
00
$14
7
0
0
0
00
Cost of Goods Sold
24
0
0
0
00
48
0
0
0
00
72
0
0
0
00
Gross Profit on Sales
$42
0
0
0
00
0
0
0
0
00
6
0
0
00
9
0
0
00
5
0
0
00
6
0
0
00
6
0
0
00
2
0
0
00
0
0
0
00
19
8
0
0
00
SOLUTIONS TO SET A PROBLEMS
PROBLEM 24A-1 INSTANT STOP
INCOME STATEMENT SHOWING DEPARTMENTAL GROSS PROFIT
FOR YEAR ENDED DECEMBER 31, 201X
Grocery
Pizza
Total
Sales
$20,000
$16,000
$ 36,000
Net Sales
Cost of Goods Sold
Gross Profit on Sales
Operating Expenses
Net Income
PROBLEM 24A-2 HERRINGS COMPANY
DEPARTMENTAL EXPENSES
CLOTHING
HARDWARE
TOTAL OPERATING
EXPENSE
DIRECT
INDIRECT
DIRECT
INDIRECT
DIRECT
INDIRECT
1.
Rent Expense
$3,714
$9,286
$13,000
PROBLEM 24A-3 JAY’S CORPORATION
INCOME STATEMENT SHOWING DEPARTMENTAL INCOME BEFORE TAX
FOR YEAR ENDED DECEMBER 31, 201X
TVs
WASHERS
TOTALS
Net Sales
$120
0
0
0
00
$24
0
0
0
00
$144
0
0
0
00
Cost of Goods Sold
37
0
0
0
00
20
0
0
0
00
57
0
0
0
00
5
0
5
0
0
0
Income before Taxes
5
0
5
0
0
0
Net Income
$48
4
2
5
00
PROBLEM 24A-4
(1) SABATINI COMPANY
DEPARTMENTAL EXPENSES
JEWELRY
SHOES
DIRECT
INDIRECT
DIRECT
INDIRECT
TOTALS
A.
Salaries Expense
$2,800
$5,540
$1,750
$4,360
$14,450
PROBLEM 24A-4 (CONCLUDED)
(2) SABATINI COMPANY
INCOME STATEMENT SHOWING DEPARTMENTAL CONTRIBUTIONS
TO INDIRECT EXPENSE
FOR MONTH ENDED AUGUST 31, 201X
JEWELRY
SHOES
TOTALS
Net Sales
$277
0
0
0
00
$218
0
0
0
00
$495
0
0
0
00
Cost of Goods Sold
203
0
0
0
00
115
0
0
0
00
318
0
0
0
00
Indirect Departmental Expenses
6
0
0
00
12
Net Income
SOLUTIONS TO SET B PROBLEMS
PROBLEM 24B-1 PROMPT STOP
INCOME STATEMENT SHOWING DEPARTMENTAL GROSS PROFIT
FOR YEAR ENDED DECEMBER 31, 201X
Grocery
Pizza
Total
Sales
$20,000
$22,000
$42,000
Less: Sales Returns & Allowances
1,700
2,800
4,500
Net Sales
Gross Profit on Sales
Operating Expenses
Income Before Taxes
Net Income
PROBLEM 24B-2 NICKOLAS COMPANY
DEPARTMENTAL EXPENSES
CLOTHING
HARDWARE
TOTAL OPERATING
EXPENSE
DIRECT
INDIRECT
DIRECT
INDIRECT
DIRECT
INDIRECT
1.
Rent Expense
$6,759
$9,741
$16,500
$4,450
660
$5,430
PROBLEM 24B-3 JACK’S CORPORATION
INCOME STATEMENT SHOWING DEPARTMENTAL INCOME BEFORE TAX
FOR YEAR ENDED DECEMBER 31, 201X
TVS
WASHERS
TOTALS
Net Sales
$66
0
0
0
00
$33
0
0
0
00
$99
0
0
0
00
PROBLEM 24B-4
(1) PARK COMPANY
DEPARTMENTAL EXPENSES
JEWELRY
SHOES
DIRECT
INDIRECT
DIRECT
INDIRECT
TOTALS
A.
Salaries Expense
$3,300
$5,004
$2,000
$3,996
$14,300
Depreciation Expense
46,000
Advertising Expense
14,625
22,640
Administrative Expense
25,125
Rent Expense
11,800
$53,604
$25,400
PROBLEM 24B-4 (CONCLUDED)
(2) PARK COMPANY
INCOME STATEMENT SHOWING DEPARTMENTAL CONTRIBUTIONS
TO INDIRECT EXPENSE
FOR MONTH ENDED SEPTEMBER 30, 201X
Jewelry Shoes Totals
Net Sales
$278
0
0
0
00
$222
0
0
0
00
$500
0
0
0
00
Cost of Goods Sold
119
5
0
0
00
20
1
9
6
00
139
6
9
6
00
Direct Departmental Expenses
3
0
0
00
0
0
0
00
3
0
0
00
54
33
5
0
0
00
11
8
0
0
00
FINANCIAL REPORT PROBLEM SOLUTION—2016 Amazon’s Annual Report