Campbell Manufacturing Company began operations in 20X6. Depreciation for the year amounted to $200,000; 30% relates...

Campbell Manufacturing Company began operations in 20X6. Depreciation for the year amounted to $200,000; 30% relates to sales, 20% relates to administrative facilities, and 50% to the factory. Of the total units produced during the year, 75% were sold in 20X6 and 25% in 20X7. Of the total depreciation of $200,000, how much will be included on the 20X6 income statement?

Expert Solution

AS PER ACCOUNTING PURPOSE:

TOTAL DEPRECIATION INCURRED FOR THE YEAR AMOUNTED TO $200000 TO BE INCLUDED ON THE 20X6 INCOME STATEMENT.

AS PER COST ACCOUNTING PURPOSE:

DEPRECIATION RELATED TO FACTORY OVERHEAD AND ADMINISTRATION OVERHEAD TO BE RECOGNISE ON THE BASIS OF

CLOSING FINISHED GOOD DIVIDED BY FINISHED GOODS PRODUCED IN THE YEAR MULTIPLIED BY COST OF PRODUCTION.

{CLOSING FINISHED GOODS / FINISHED GOODS PRODUCED IN THE YEAR x COST OF PRODUCTION

PARTICULARS	AMOUNT
RAW MATERIAL
DIRECT LABOR
PRIME COST
FACTORY OVERHEAD (200000 x 50%)	100000
WORK COST	100000
ADMINISTRATION OVERHEAD (200000 x 20%)	40000
COST OF PRODUCTION	140000
ADD: OPENING FINISHED GOODS
LESS: CLOSING FINISHED GOODS {140000 x 25%)	(35000)
COST OF GOODS SOLD	105000
SELLING OVERHEAD (200000 x 30%)	60000
COST OF SALE	165000

DEPRECIATION OF AMOUNT $ 165000 TO BE INCLUDED IN 20X6 INCOME STATEMENT AS PER COST ACCOUNTING.

ekkarill92 answered 11 months ago

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