The following expenses were incurred by a merchandising business during the year. In which expense section of the income statement

The following expenses were incurred by a merchandising business during the year. In which expense section of the income statement should each be reported: (a) selling, (b) administrative, or (c) other?

1. Advertising expense
2. Depreciation expense on store equipment
3. Insurance expense on office equipment
4. Interest expense on notes payable
5. Rent expense on office building
6. Salaries of office personnel
7. Salary of sales manager
8. Sales supplies used


Answer:
a. Selling expense, (1), (2), (7), (8)
b. Administrative expense, (3), (5), (6)
c. Other expense, (4)




Two items are omitted in each of the following four lists of income statement data. Determine the amounts of the missing items, identifying them by letter.


Sales $525,000 $733,000 $1,440,000 $ (g)
Sales returns and allowances (a) 28,000 (e) 85,000
Sales discounts 41,350 17,500 100,000 65,000
Net sales 463,400 (c) 1,295,000 (h)
Cost of merchandise sold (b) 410,000 (f) 900,000
Gross profit 83,500 (d) 275,000 600,00


Answer:
a. $20,250 ($525,000 – $41,350 – $463,400)
b. $379,900 ($463,400 – $83,500)
c. $687,500 ($733,000 – $28,000 – $17,500)
d. $277,500 ($687,500 – $410,000)
e. $45,000 ($1,440,000 – $100,000 – $1,295,000)
f. $1,020,000 ($1,295,000 – $275,000)
g. $1,650,000 ($1,500,000 + $85,000 + $65,000)
h. $1,500,000 ($900,000 + $600,000)