Modern Decorators is a sole proprietorship. After the firm has recorded adjustments, it has the balances shown in the work sheet on page 986 for revenue and expense accounts and merchandise inventories for its two depart¬
ments on December 31, the end of the fiscal year. The values of merchandise inventory on January 1 (beginning) are: carpets, $146,130; draperies, $72,420.
Essential data for direct expenses (and sources of figures) are as follows:

a. Sales Salary Expense (sales personnel work in one department only) is allo¬
cated as follows: carpets, $97,140; draperies, $41,640.

b. Advertising: newspaper advertising is allocated as follows: carpets, $10,080;
draperies, $2,520.

c. Depreciation: Depreciation of store equipment is apportioned on the basis of the average cost of equipment in each department. The average cost of store equipment is $15,000 for carpets and $5,000 for draperies.

d. Bad Debts Expense: Department managers are responsible for granting credit on net sales made by their respective departments. Bad Debts Expense is alio cated as follows: carpets, $4,104; draperies, $1,596

Instructions Prepare an income statement to show each department’s departmental margin.
Problem Set B

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ACCOUNT NAME Merchandise Inventory, Carpets Merchandise Inventory, Draperies Sales, Carpets ADJUSTED TRIAL DEBIT BALANCE 1579 80 00 6894000 CREDIT 569568 00 Sales, Draperies Sales Returns and Allowances, Carpets Sales Returns and Allowances, Draperies Purchases, Carpets Purchases, Draperies Purchases Returns and Allowances, Carpets Purchases Returns and Allowances, Draperies Purchases Discount, Carpets Purchases Discount, Draperies Freight In, Carpets Freight In, Draperies Sales Salary Expense Advertising Expense Depreciation Expense, Store Equipment Miscellaneous Selling Expense Bad Debts Expense Office Salary Expense 1444800 655200 316 235 00 222 4 3 2 00 124 935 00 494400 2010 00 354600 222000 2018500 493500 138 7 8000 1260000 960000 117000 570000 2556000 Rent Expense 2520000 Utilities Expense 378000 Insurance Expense 126000 Miscellaneous General Expense 102000 Interest Expense 186200