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Chapter 4: Question 20Q (page 180)

Santo Corporation has eight expense accounts in its general ledger, classified as selling expenses. Should Santo report these eight expenses separately in its income statement or report one total amount for selling expenses?

Short Answer

Expert verified

Santo Corporation may report these expenses by choosing one of the two methods available.

Step by step solution

01

Meaning of Selling Expenses

Selling general and administrative expenses include all expenses directly incurred for sales and administrative fees.

02

Explanation for reporting selling expenses

Both the formats are acceptable but presenting a single expense amount may be preferably supported by a schedule of eight components in the notes to financial statements if the condensed version is adopted. By disclosing all the results of the activities, a reader can understand and discover the facts of importance.

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Most popular questions from this chapter

Using the information from BE4-9, prepare a retained earnings statement for the year ended December 31, 2017. Assume an error was discovered: land costing $80,000 (net of tax) was charged to maintenance and repairs expense in 2014.

Question: Which of the following is not an acceptable way of displaying the components of other comprehensive income under IFRS?

(a) Within the statement of retained earnings.

(b) Second income statement.

(c) Combined statement of comprehensive income.

(d) All of these choices are acceptable.

IFRS4-1 Explain the difference between the 鈥渘ature-of-expense鈥� and 鈥渇unction-of-expense鈥� classifications.

Cooper Investments reported an unusual gain from the sale of certain assets in its 2017 income statement. How does intra period tax allocation affect the reporting of this unusual gain?

Question: Below is the Retained Earnings account for the year 2017 for Acadian Corp.

Retained earnings, January 1, 2017 \(257,600

Add:

Gain on sale of investments (net of tax) \)41,200

Net income 84,500

Refund on litigation with government, related to

the year 2014 (net of tax) 21,600

Recognition of income earned in 2016, but omitted

from income statement in that year (net of tax) 25,400 172,700

430,300

Deduct:

Loss on discontinued operations (net of tax) 35,000

Write-off of goodwill (net of tax) 60,000

Cumulative effect on income of prior years in changing

from LIFO to FIFO inventory valuation in 2017 (net of tax) 23,200

Cash dividends declared 32,000 150,200

Retained earnings, December 31, 2017 $280,100

Instructions

  1. Prepare a corrected retained earnings statement. Acadian Corp. normally sells investments of the type mentioned above. FIFO inventory was used in 2017 to compute net income.
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