A Lumber Mill Bought a Shipment of Logs for $40,000

question 101

Multiple Choice

A lumber mill bought a shipment of logs for $40,000.When cut,the logs produced a million board feet of lumber in the following grades.Compute the cost to be allocated to Type 1 and Type 2 lumber,respectively,if the value basis is used. Type 1-400,000 bd.ft.priced to sell at $0.12 per bd.ft.
Type 2- 400,000 bd.ft.priced to sell at $0.06 per bd.ft.
Type 3- 200,000 bd.ft.priced to sell at $0.04 per bd.ft.

• A)$16,000;$16,000.
• B)$13,333;$4,444.
• C)$40,000;$24,000.
• D)$24,000;$12,000.
• E)$24,000;$8,000.

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Definitions:

Consolidated Financial Statements

Financial statements that represent the aggregation of a parent company and its subsidiaries, presenting the financial position and results of operations as if the group were a single entity.

Consolidated Statement

A financial statement that aggregates the financial positions of a parent company and its subsidiaries.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear, and tear over time.

Straight-Line Method

A method of calculating the depreciation of an asset that allocates an equal amount of depreciation each year over the asset's useful life.