Selected information from the adjusted trial balance of Warmers Inc. as of December 31, 20X1, follows:
Department A Department B Total
Merchandise Inventory, January 1 $ 42,000 $ 12,000 $ 54,000
Merchandise Inventory, December 31 54,000 10,700 64,700
Sales 493,200 328,800 822,000
Sales Returns and Allowances 4,932 3,288 8,220
Purchases 185,000 100,000 285,000
Freight In 470 470 940
Purchases Returns and Allowances 1,350 470 1,820
Sales Salaries Expense 97,000 47,000 144,000
Advertising Expense 14,700 4,700 19,400
Store Supplies Expense 630 23 653
Cash Short or Over 43 83 126
Insurance Expense 14,700
Rent Expense 33,000
Utilities Expense 5,700
Office Salaries Expense 37,000
Other Office Expense 1,250
Uncollectible Accounts Expense 4,700
Depreciation Expense—Furniture and Fixtures 5,700
Depreciation Expense—Office Equipment 470
Interest Income 270
Interest Expense 470
1. Insurance Expense: in proportion to the total of the furniture and fixtures (the gross assets before depreciation) and the ending inventory in the departments. These totals are as follows:
Department A $ 102,000
Department B 68,000
Total $ 170,000
2. Rent Expense and Utilities Expense: on the basis of floor space occupied, as follows:
Department A 3,990 square feet
Department B 1,710 square feet
Total 5,700 square feet
3. Office Salaries Expense, Other Office Expenses, and Depreciation Expense—Office Equipment: on the basis of the gross sales in each department.
4. Uncollectible Accounts Expense: on the basis of net sales in each department.
5. Depreciation Expense—Furniture and Fixtures: in proportion to cost of furniture and fixtures in each department. These costs are as follows.
Department A $ 30,550
Department B 16,450
Total $ 47,000
Required:
Prepare a departmental income statement for the year ended December 31, 20X1. The bases for allocating indirect expenses are given above.
Analyze:
Which department reports the higher return on net sales?