Chapter 2, Problem 37P

Consider the following cost items:

1. 1. Salaries of players on the Boston Red Sox.
2. 2. Year-end completed goods of Levi Strauss jeans.
3. 3. Executive compensation costs at Home Depot.
4. 4. Advertising costs for Sony.
5. 5. Costs incurred during the period to insure a Ford plant against fire and flood losses.
6. 6. Current year’s depreciation on a Carnival Cruise Line ship.
7. 7. The cost of printer ink and paper used during the period by Shutterfly.
8. 8. Assembly-line wage cost incurred at a Kona bicycle plant.
9. 9. Year-end production in process at Lenovo computer manufacturer.
10. 10. The cost of products sold to customers of a Target store.
11. 11. The cost of products sold to distributors of carpet manufacturer Shaw Floors.

Required:

1. 1. Evaluate the costs just cited, and determine whether the associated dollar amounts would be found on the firm’s balance sheet, income statement, or schedule of cost-of-goods-manufactured. (Note: In some cases, more than one answer will apply.)
2. 2. What major asset will normally be insignificant for service enterprises and relatively substantial for retailers, wholesalers, and manufacturers? Briefly discuss.
3. 3. Briefly explain the major differences between income statements of service enterprises versus those of retailers, wholesalers, and manufacturers.