Elegant Decor Company's management is trying to decide whether to eliminate Department 200 which has produced losses or low profits for several years. The company's 2017 departmental income statements show the following ELEGANT DECOR COMPANY Departmental Income Stateents For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Dept. 100 Dept. 200 Combined $463,000 $292,000 $755,000 207,000 _477,000 278,000 270,000 193, 000 85,000 Direct expenses Advertising Store supplies used Depreciation-Store equipment Total direct expenses 17,000 4,500 4,800 26, 300 12,000 4,000 3.400 19,400 29,000 8,500 8,200 45,700 Allocated expenses Sales salaries Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses Total allocated ex 52,000 9, 440 9,500 21,840 2,100 2,700 97,580 123, 880 83,200 14,160 17,000 36,400 3,500 4,700 158,960 204,660 69,120 4,220 64,900 31,200 4,720 7,500 14,560 1,400 2,000 61,380 80,780 penses Total expenses Net income (loss) 5 00 to t rne etnn hnai ao tu Te,e s-h gaen 3eh bes umnT eyno easn aea eansdn otff.c e e n e e 0 $2 to al e s $ d s h a a e a a ffi mets vhh ptsnd ntne rec plec 5 5 ae d aso 5 otdne hec utp4 oee ti ri 5 ssa h al h 2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100's sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk ELEGANT DECOR COMPANY Forecasted Annual Income Statement Under Plan to Eliminate Department 200 Sales Cost of goods sold Gross profit from sales Operating expenses 463,000 270,000 193,000 Advertising Store supplies used Depreciation of store equipment Sales salaries Rent expense Bad debts expense Office salary Insurance expense Miscellaneous office expenses 17,000 4,500 8,200 52,000 14,160 9,500 18,200 Analysis Component 3. Reconcile the company's combined net income with the forecasted net income assuming that Department 200 is eliminated (list both items and amounts). ELEGANT DECOR COMPANY Reconciliation of Combined Income with Forecasted Income Combined net income Forecasted net income