Question

THORNTON COMPANY
Income Statements for the Year 2018
Segment	A				B				C
Sales	$	169,000			$	248,000			$	259,000
Cost of goods sold		(128,000	)			(76,000	)			(88,000	)
Sales commissions		(23,000	)			(32,000	)			(28,000	)
Contribution margin		18,000				140,000				143,000
General fixed operating expenses (allocation of president’s salary)		(43,000	)			(48,000	)			(34,000	)
Advertising expense (specific to individual divisions)		(6,000	)			(13,000	)			0
Net income	$	(31,000	)		$	79,000			$	109,000

Required

Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A.

Answer 1