Allstar Exposure designs and sells advertising services to small, relatively unknown companies. Last month, Allstar had sales

Question:

Allstar Exposure designs and sells advertising services to small, relatively unknown companies. Last month, Allstar had sales commissions costs of $50,000, technology costs of $75,000, and research and development costs of $200,000. Selling expenses were $10,000, and administrative expenses equaled $35,000. Sales totaled $410,000.

Required:
1. Prepare an income statement for Allstar for the past month.
2. Briefly explain why Allstar’s income statement has no line item for Cost of Goods Sold.

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1 Allstar Exposure Income Statement For the Past Month Sales revenues 410000 Less operating expenses Sales commissions 50000 Technology 75000 Research and development 200000 Selling expenses 10000 Administrative expenses 35000 370000 Operating income 40000 2 Allstar has no Cost of Good Sold line item because the company is a service provider rather than a manufacturer Therefore as a service provider Allstar has no inventory costs raw materials work in process or finished goods to flow through to Cost of Goods Sold when it recognizes its sales revenue ...View the full answer

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