The Following Are the Income Statements of the Hancock Company

question 35

Multiple Choice

The following are the income statements of the Hancock Company for two consecutive years. Increases in which of the expenses contributed to the net loss in Year 2?

• A)Cost of goods sold and selling expenses
• B)Selling expenses and administrative expenses
• C)Cost of goods sold and administrative expenses
• D)Administrative expenses

---

Definitions:

Shareholders

Owners of shares in a company, giving them rights to vote on company matters and receive dividends.

S Corporation

A special designation that allows small businesses to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

S Corporation

A specific kind of corporation in the U.S. that conforms to certain Internal Revenue Code criteria, which permits it to distribute income directly to its shareholders, thereby bypassing the double taxation issue.

Double Taxation

The imposition of two or more taxes on the same income, asset, or financial transaction, often seen in international business where income is taxed in both the source and the resident country.