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ss7ja [257]
2 years ago
8

Allstar Exposure designs and sells advertising services to small, relatively unknown companies. Last month, Allstar had sales co

mmissions costs of $42,000, technology costs of $71,000, and research and development costs of $140,000. Selling expenses were $12,000, and administrative expenses equaled $30,000. Sales totaled $475,000. Required:1. Prepare an income statement for Allstar for the past month.2. Briefly explain why Allstar’s income statement has no line item for Cost of Goods Sold.Labels Add operating expenses For the Next Month For the Past Month Less operating expenses Amount Descriptions Administrative expenses Operating income Operating loss Research and development Sales commissions Sales revenue Selling expenses TechnologyTotal selling expenses1. Prepare an income statement for Allstar for the past month. Refer to the list of Labels and Amount Descriptions for the exact wording of text items within your income statement. Be sure to complete the statement heading.
Business
1 answer:
Aloiza [94]2 years ago
5 0

Answer: The answer is Net income $180,000

Explanation:

All star Exposure

Monthly income Statement

$ $

Sales. 475,000

Less: Expenses

Sales commission 42,000

Technology cost 71,000

Research & Development cost 140,000

Selling Expenses 12,000

Administrative Expenses 30,000

---------------------

(295,000)

---------------------

Net income. 180,000

-----------------------

The All star income statement has no line item for cost of good sold because cost of good sold is a direct cost incurred by All star Exposure on the goods sold. it does not appear as part of the expenses in the income statement.

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Answer:

1. Debit : Equipment Depreciation : $102000

Credit : Equipment Accumulated Depreciation : $102000

2. Debit : Building Depreciation account : $16857

Credit : Building Accumulated Depreciation : $16857

Explanation:

A change in accounting estimate occurs when there is new information that surfaces, affecting the initial situation. It can affect the carrying amount of an asset or liability as well as alter the accounting for existing and future assets or liabilities.

1. The equipment has a cost of $525000 and its depreciation was changed to using the straight line method after 3 years of use. Straight- line depreciation per year:

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The cost of asset and the number of useful years left would have to be found since the machine already depreciated using the sum-of-years-digits.

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Accumulated depreciation is required to find what the asset costs at the beginning of 2015.

Depreciation using sum-of-years-digits:

Sum-of-years-digits is an accelerated form of depreciation based on the assumption that an asset’s productivity reduces with time.

(Cost - Salvage value) x (remaining useful life of asset / sum of years digits)

Sum-of-years-digits = 1 + 2 + 3 + 4 + 5 = 15

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Depreciation for 2013 :

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Depreciation for 2014 :

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Credit : Equipment Accumulated Depreciation : $51000

2. The building has a cost of $693000. It is depreciated using the straight-line method of depreciation. Hence, the depreciation expense is the same annually throughout the life of the asset.

Annual depreciation = (Cost of asset - salvage value) / number of useful years

Useful number of years was initially 30 years, later in 2015, it was changed to 40 years.

In order to find the depreciation for 2015, we need to find the cost of asset at the beginning of 2015 and the estimated useful life years left.

Estimated useful life years left : 40 - 3 = 37 years

Cost of asset :

To find this, we require the accumulated depreciation.

Depreciation for one year:

(693000 - 0) / 30 = $23100

$23100 x 3 = $69300 for 3 years

Cost of asset at the beginning of 2015 :

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