20.Use this information to answer the following question. Alcom & Zeto Company I
ID: 2340045 • Letter: 2
Question
20.Use this information to answer the following question. Alcom & Zeto Company Income Statement For the Year Ended December 31, 20x7 Revenues Net sales $100,000 Dividend income 8,750 Total revenues $108,750 Costs and expenses Costs of goods sold S 37,000 Selling expenses 10,000 General and administrative expenses 6,750 Interest expense 6,250 Total costs and expenses 60,000 Income before income taxes $ 48,750 Income taxes 19,500 Net income S 29,250 If the income statement were prepared in a multistep form, operating expenses would be A) $46,750. B) $16,750 C) $23,000 D) $40,000Explanation / Answer
To answer this we must first understand the meaning of "multistep form" income statement. As you must be familiar with income statement, a multistep form of income statement is one in which the income and expenses are divided into mutiple steps namely, operating expenses, administrative expenses, finance expenses etc.
Operating expenses are defined as those expenditures that a business incurs to engage in any activities not directly associated with the production of goods or services. These expenditures are the same as selling, general and administrative expenses. It does not include the Cost of goods sold and Financial expenses incurred by the entity.
As mentioned in the question "Total costs and expenses" is $60,000, this includes all the costs including financial costs and costs of goods sold. The sum can be broken up as follows:
From the above table we can calculate the total operating expenses to be $ 10,000.00 + $ 6,750.00 = $ 16,750.00
So the answer is B.
Costs of Goods Sold (Directly related to production) $ 37,000.00 Selling Expenses (Operating Expenses) $ 10,000.00 Administration Expenses (Operating Expenses) $ 6,750.00 Finance Expenses (interest cost) $ 6250.00 Total Costs $ 60,000.00Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.