(L.O. 3) Which of the following is not a selling expense?

a. Advertising expense

b. Office salaries expense

c. Freight-out

d. Store supplies consumed Approach and Explanation: Take each account and determine its classification. Items “a,” “c,” and “d”
are selling expenses because they are associated with the sales function. Office salaries are related to normal operations, but they are not related to the sales function of the business. Therefore, they are not classified as a selling expense. (Solution = b.)
QUESTION 4. (L.O. 3) The accountant for the Orion Sales Company is preparing the income statement for 2014 and the balance sheet at December 31, 2014. The January 1, 2014 merchandise inventory balance will appear:

a. only as an asset on the balance sheet.

b. only in the cost of goods sold section of the income statement.

c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.
Explanation: The January 1, 2014 inventory amount is the beginning inventory figure. Beginning inventory is a component of the cost of goods available for sale for the period which is a component of cost of goods sold. (Solution = b.)