hapter 3 Quiz Question 5 of 9 Commissions of 3000 for salesp

hapter 3 Quiz Question 5 (of 9) Commissions of $3,000 for salespeople who made sales in December will be peid Jan .The phone bill of $400 for December was recelved and will be paid J The store rent of $2,000 for January. 2017 was paid on December 28, 2016. . At the beginning of November, Toby paid $1,500 for advertising in a monthly magazine that is distributed Toby Toy Store has noticed the following items that need to be considered for its income statement for the year ended December 31, 2016 uary 3, 2017 in November and December of 2016, and January of 2017 What is the proper amount of expenses to be included in the income statement for the year? O $4,400 O $6.900 O $6,400 O $5.900

Solution

1. Commission expense has been incurred in the month of December, 2016. Hence $3,000 of commission expense would included as expense in the income statement for the year 2016.

2. Telephone charge expense has been incurred in the month of December, 2016. Hence it should be recognized in December, eventhough it would be paid in january. Thus $400 of telephone expense would included as expense in the income statement for the year 2016.

3. Store rent paid in December for the month of January. Hence, it would be recognized as expense in the month of January only not in December.

4. $1,500 was paid for advertisement in November for 3 month (Nov. Dec. and Jan.). Advertisement expense of $1,000 ($1,500*2/3) for 2 months (Nov. and Dec.) must be recognized in the year 2016. Thus $1,000 of Advertisement expense would included as expense in the income statement for the year 2016.

Hence, the total expense of $4,400 ($3,000 +$400 + $1,000) to be included in the income statement for the year 2016.