Question

Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2014, included the following expense accounts:

Accounting and legal fees $280,000
Advertising 240,000
Freight-out 150,000
Interest 120,000
Loss on sale of long-term investments 60,000
Officers' salaries 360,000
Rent for office space 360,000
Sales salaries and commissions 270,000
One-half of the rented premises is occupied by the sales department.
How much of the expenses listed above should be included in Perry's general and administrative expenses for 2014?

Answer 1

Perry Corp.'s general and administrative expenses for 2014 amount to $820,000, including accounting and legal fees, half of the rent for office space, and officers' salaries.

Step-by-step explanation:

To calculate the general and administrative expenses for Perry Corp. for the year 2014, we consider the following accounts: Accounting and legal fees, Rent for office space (50% allocated to the sales department), Officers' salaries, and other general expenses. Advertising, Freight-out, and Sales salaries and commissions are categorized under selling expenses, whereas Interest and Loss on sale of long-term investments are not operating expenses.

Here's the breakdown of general and administrative expenses:

• Accounting and legal fees: $280,000
• Rent for office space (50% for general and administrative): $180,000 (which is 50% of $360,000)
• Officers' salaries: $360,000

Total general and administrative expenses are the sum of these items, which equals $820,000.