Williams Company began operations in January 2019 with two operating (selling) departments and one service (office)department. Its departmental income statements follow.

Williams plans to open a third department in January 2020 that will sell paintings. Management predicts that the new department will generate $50,000 in sales with a 55% gross profit margin and will require the following direct expenses: sales salaries, $8,000; advertising, $800; store supplies, $500; and equipment depreciation, $200. It will fit the new department into the current rented space by taking some square footage from the other two departments.When opened, the new Painting department will fill one-fifth of the space presently used by the Clock department and one-fourth used by the Mirror department.

Management does not predict any increase in utilities costs, which are allocated to the departments in proportion to occupied space (or rent expense). The company allocates office department expenses to the operating departments in proportion to their sales. It expects the Painting department to increase total office department expenses by $7,000.Since the Painting department will bring new customers into the store, management expects sales in both the Clock and Mirror departments to increase by 8%. No changes for those departments’ gross profit percents or their direct expensesare expected except for store supplies used, which will increase in proportion to sales.

Required

Prepare departmental income statements that show the company’s predicted results of operations for calendar-year 2020 for the three operating (selling) departments and their combined totals. (Round percents to the nearest one-tenth and dollar amounts to the nearest whole dollar.)

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Departmental Income Statements For Year Ended December 31, 2019 Clock Mirror Combined $130,000 $55,000 $185,000 Sales Cost of goods sold . 63,700 34,100 97,800 Gross profit ... 20,900 66,300 87,200 Direct expenses Sales salaries . 20,000 7,000 27,000 1,200 Advertising . 500 1,700 400 1,300 Store supplies used 900 Depreciation-Equipment . 1,500 300 1,800 23,600 8,200 Total direct expenses. 31,800 Allocated expenses Rent expense. 7,020 3,780 10,800 Utilities expense. 2,600 1,400 4,000 Share of office department expenses. 10,500 4,500 15,000 Total allocated expenses. 20,120 9,680 29,800 Total expenses 43,720 17,880 61,600 $ 22,580 $ 3,020 $ 25,600 Net income