The following items were among those reported on Ernie Ltd.'s income statement for the year ended December 31, 2017: The office space is used equally by Ernie's sales and accounting departments.What amount should be classified as general and administrative expenses in Ernie's multiple-step income statement for 2017?
A)$117,500
B)$217,500
C)$335,000
D)$465,500

Question

The following items were among those reported on Ernie Ltd.'s income statement for the year ended December 31, 2017:  The office space is used equally by Ernie's sales and accounting departments.What amount should be classified as general and administrative expenses in Ernie's multiple-step income statement for 2017?
A)$117,500 
B)$217,500 
C)$335,000 
D)$465,500

Quizplus · Accepted Answer

General and administrative expenses include rent, utilities, and other costs associated with running the overall operations of the company. The office space cost should be included in these expenses, as it is used by both sales and accounting departments, which are part of the overall operations of the company. Therefore, $435,000 - $217,500 - $182,500 = $35,000 should be classified as general and administrative expenses. Adding this amount to the other general and administrative expenses listed in the question gives a total of $217,500.

The Following Items Were Among Those Reported on Ernie Ltd