[The following information applies to the questions displayed below.] Elegant Decor Companys management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The companys departmental income statements show the following.

ELEGANT DECOR COMPANY Departmental Income Statements For Year Ended December 31, 2019
	Dept. 100					Dept. 200					Combined
Sales		$	444,000				$	290,000				$	734,000
Cost of goods sold			264,000					210,000					474,000
Gross profit			180,000					80,000					260,000
Operating expenses
Direct expenses
Advertising			17,500					13,500					31,000
Store supplies used			6,000					5,500					11,500
DepreciationStore equipment			4,600					3,400					8,000
Total direct expenses			28,100					22,400					50,500
Allocated expenses
Sales salaries			65,000					39,000					104,000
Rent expense			9,450					4,740					14,190
Bad debts expense			9,500					7,600					17,100
Office salary			15,600					10,400					26,000
Insurance expense			2,300					1,500					3,800
Miscellaneous office expenses			2,000					1,200					3,200
Total allocated expenses			103,850					64,440					168,290
Total expenses			131,950					86,840					218,790
Net income (loss)		$	48,050				$	(6,840	)			$	41,210

In analyzing whether to eliminate Department 200, management considers the following:

1. The company has one office worker who earns $500 per week, or $26,000 per year, and four salesclerks who each earns $500 per week, or $26,000 per year for each salesclerk.
2. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments.
3. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office workers salary would be reported as sales salaries and half would be reported as office salary.
4. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200.
5. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 69% of the insurance expense allocated to it to cover its merchandise inventory; and 17% of the miscellaneous office expenses presently allocated to it.

2. Prepare a forecasted annual income statement for the company reflecting the elimination of Department 200 assuming that it will not affect Department 100s sales and gross profit. The statement should reflect the reassignment of the office worker to one-half time as a salesclerk.