This exercise will help you to understand how the sale of a plant asset compares with the sale of inventory. Houston Merchandising Company sold two items. The following facts pertain:
|
Item 1 |
Item 2 |
|
|
Sales price |
$10,000 |
$10,000 |
|
Cost/book value |
5,200 |
5,200 |
|
Sales commission |
400 |
400 |
Item 1 is an inventory item. Item 2 is a plant asset.
Instructions
Explain the manner of reporting each item on a multiple-step income statement.