# Quiz 2 Answers and Explanations 1. Lantz Company has provided the following information: Cash sales totaled \$255,000. Credit sales totaled \$479,000.

Quiz 2 Answers and Explanations 1. Lantz Company has provided the following information: Cash sales totaled \$255,000. Credit sales totaled \$479,000. Cash collections from customers for services yet to be provided totaled \$88,000. A \$22,000 loss from the sale of property and equipment occurred. Interest income was \$7,700. Interest expense was \$19,900. Cost of goods sold was \$336,000. Rent expense was \$36,000. Salaries expense was \$49,000. Other operating expenses totaled \$79,000. Unearned revenue was \$4,000
Lantz’s
Operating revenues = \$734,000 = \$255,000 + \$479,000.
Operating expenses = \$500,000 = \$336,000 + \$36,000 + \$49,000 + \$79,000.
Operating income = \$234,000 = \$734,000 – \$500,000. Income before taxes = \$199,800 = \$234,000 – \$22,000 + \$7,700 – \$19,900.
Question: Shouldn’t Interest expense part of operation expense?
According to textbook: Operating activities includes interests earnings and payments on investments.

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