Question

Which of the following items would be reported in the "Other expenses and losses" section of a multi-step income statement?

A) Freight out.

B) Salaries and wages expense.

C) Gain on disposal of plant assets.

D) Casualty loss from vandalism.

2. All of the following are advantages of a perpetual inventory systems except:

		Ability to determine inventory quantities at any time and check whether the amount actually on hand agrees with the inventory records.
		Ability to produce interim financial statements because cost of goods sold may be determined at any time.
		Better control over inventories
		Ability to obtain higher sales prices for the inventory.

Answer 1

1) Freight out and salaries and wages expense are operating expense, Gain on disposal of plant assets is not recorded in other expense and losses but reported in Other income and gains

So Only Casualty loss is that loss which is not operating in nature

So answer is d) Casualty loss from Vandalism

2) Perpetual inventory system advantage has:

a) Ability to determine inventory quantities at any time and check whether the amount actually on hand agrees with the inventory records.

b) Ability to produce interim financial statements because cost of goods sold may be determined at any time.

c) Better control over inventories

But ability to obtain higher sales price for the inventory is not depend on perpetual or periodic but depend on FIFO, LIFO and average cost method

So answer is d) Ability to obtain higher sales prices for the inventory