Using the Data Provided Below, Determine What Amounts Will Appear

question 14

Essay

Using the data provided below, determine what amounts will appear on the income statement that is prepared by "nature of expenses."
Note 1 - Distribution costs include $13,000 of employee wages and $10,000 of depreciation.
Note 2 - Cost of goods sold includes $10,000 for depreciation; the remaining amount relates to the net change in inventory and purchases during the year.
Note 3 - General and administrative expenses include $20,000 of employee wages and $5,000 of depreciation.

---

Definitions:

Time Inconsistency

The tendency of certain conditions or decisions to change over time, especially in the context of economic planning and policy-making.

Prospect Theory

A behavioral economics theory of preferences having three main features: (1) people evaluate options on the basis of whether they generate gains or losses relative to the status quo; (2) gains are subject to diminishing marginal utility, while losses are subject to diminishing marginal disutility; and (3) people are prone to loss aversion.

Behavioral Economists

Economists who study how psychological, social, cognitive, and emotional factors affect economic decisions and market outcomes.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision.