RL Company Income Statement Sales Revenue Less: Cost of Goods Sold Gross Profit
ID: 2328955 • Letter: R
Question
RL Company Income Statement Sales Revenue Less: Cost of Goods Sold Gross Profit Operating and Administrative Expenses: 1,000,000 -$300,000 $700,000 Administrative Expense Adertising Expense Amortization Expense Depreciation Expense Rent Expense Salaries Expense Supplies Expense Utilities Expense Total Operating& Administrative Expenses $25,000 14,000 $10,000 $15,000 $14,000 74,000 $1,000 $48,000 $201,000 499,000 Operating Income Other Revenues and Expenses: Gain on Sale of Equipment Depletion Expense Interest Expense Total Other Revenues and Expenses $10,000 42,000 $8,000 Earnings Before Income Taxes Less: Income Tax Expense Net Income 40,000 459,000 $50,000 409,000Explanation / Answer
Depletion expense is similar depreciation the difference is the word depletion is used in industries where minerals,iron ore etc are extracted and the word depreciation is used for recording the wear and tear of the fixed asset in the normal course of business. The concept of depletion/depreciation exepense come because when a long term asset is used in the normal course of business it causes wear and tear of that asset day by day so in oder to allocate that propotion of amount each year this concept is introduced.Operating expense is that expense which is incurred in the normal course of business if in that perspective if we consider depletion expense it might be considered as an operating exepense since asset is used in normal course of business but on the other hand depletion exepense doesn't involve any cash out flow in the business it is therefore not considered as an operating expense.
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