Answer to Question #234898 in Accounting for Another you

Question

A. Prepare a Function of Expense SCI using the information below.

JJ Trading

December 31, 2020

Advertising Expense - 17,500

Amortization Expense - 5,000

Bad Depts Expense - ?

Depreciation Expense - 12,500

Freight In - 4,590

Gain on Sale of PPE - 2,732

Interest Expense - 2,838

Interest Income - 2,722

Purchase Discount - 4,100

Purchase Returns - 2,732

Purchases - 229,995

Rent Expense - 30,000

Salaries Expense - 40,000

Sales - 382,492

Sales Discount - 6,650

Sales Returns and Allowances - 2,727

Utilities Expense 27,500

B. Based on actual physical count, inventory balance are as follows:

January 1, 2020 - 12,727.50

December 31, 2020 - 10,382.50

- Additional Information:

a. Bad debts is 4 percent of net sales

b. Depreciation of 2,500 is for equipment used in the administrative office.

c. Amortization is attributed to office improvements.

d. 40 percent of salaries are for sales officers.

e. Utilities for the store represent 35 percent of the utilities expense.

f. Rental for office space is 10,000

Answer 1

Solution:

A statement of comprehensive income (SCI) by a function of expenses is one in which expenses are disclosed according to their functions such as cost of sales, selling expenses, administrative expenses, and other expenses or losses. This method allows us to calculate gross profit and operating profit within the SCI.

First, derive missing figures.

Then combine expenses by function and transfer the figures in SCI:

These have been calculated as per the below excel file: