Question

Zach Corp. pays commissions to its sales staff at the rate of 3% of net sales. Sales staff are not paid salaries but are given monthly advances of $15,000. Advances are charged to commission expense, and reconciliations against commissions are prepared quarterly. Net sales for the year ended March 31 were $15,000,000. The unadjusted balance in the commissions expense account on March 31 was $400,000. March advances were paid on April 3. In its income statement for the year ended March 31, what amount should Zach report as commission expense?

Answer 1

Based on the information given the amount that Zach should  report as commission expense is $450,000.

Using this formula

Commission expense=Percentage of net sales× Net sales

Where:

Percentage of net sales=3%

Net sales=$15,000,000

Let plug in the formula

Commission expense=3%×$15,000,000

Commission expense=$450,000

Inconclusion the amount that Zach should  report as commission expense is $450,000.

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