Question

In reviewing Larson Company’s September account records, Andy Miranda, the chief accountant, noted the following depreciation costs. Assume product costs are defined by GAAP.

1. Factory buildings: $75,000
2. Computers used in manufacturing: $12,000
3. A building used to display finished products: $24,000
4. Trucks used to deliver merchandise to customer: $18,000
5. Forklifts used in the factory: $30,000
6. Furniture used in the president’s office: $15,000
7. Elevators in administrative buildings: $20,000
8. Factory machinery: $36,000

a. What amount of depreciation cost would be classified as selling, general, and administrative expense?

b. Assume that Larson manufactured 3,000 units of product and sold 2,000 units of product during the month of September. Determine the amount of depreciation cost that would be included in cost of goods sold.

Answer 1

1
A building used to display finished products	24000
Trucks used to deliver merchandise to customer	18000
Furniture used in the president’s office	15000
Elevators in administrative buildings	20000
Selling, general, and administrative expense	77000
2
Factory buildings	75000
Computers used in manufacturing	12000
Forklifts used in the factory	30000
Factory machinery	36000
Total product cost	153000
Depreciation cost included in cost of goods sold	102000	=153000*2000/3000