Using the Data Provided Below, Determine Whether the Income Statement

question 149

Essay

Using the data provided below, determine whether the income statement will be formatted by "function of expense" or by "nature of expense." Briefly explain your response.
$\begin{array}{l|r}\text { Distribution expense } & 65,000 \\\hline \text { Cost of goods sold } & 100,000 \\\hline \text { General and administrative expense } & 45,000 \\\hline \text { Warehousing expense } & 20,000 \\\hline \text { Interest expense } & 5,000\end{array}$

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Definitions:

Trading Securities

Financial assets that are purchased by an entity not for long-term investment but rather with the intention to sell them in the near term to make a profit.

Fair Value

The estimated market value of an asset or liability based on current market prices or valuations.

Fiscal Year

A one-year period used for accounting purposes and preparing financial statements, not necessarily aligning with the calendar year.

Equity Method

An accounting technique used to record the investments in other entities where the investor has significant influence but not full control.