(Appendix 4B)Assume That the Company Uses the Step-Down Method of Allocating

question 150

Multiple Choice

(Appendix 4B) Assume that the company uses the step-down method of allocating Service Department costs to Operating Departments,and Building and Grounds costs are allocated first.How much Personnel Department cost would be allocated to Operating Department A?

• A) $0.
• B) $90,000.
• C) $92,430.
• D) $205,400.

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Definitions:

Adjusting Entries

Financial records entered at the termination of an accounting period, aimed at allocating profits and outlays to the correct period.

Pretax Income

The income earned by a company before deducting taxes, representing the company's profitability after all expenses except taxes.

Accrued Expenses

Liabilities (payables) created when expenses are incurred, but cash will be paid in the future; created at end of period during the adjustment process to reflect the amount of expense incurred that the company will pay in the future.

Depreciation Expense

Distributing the expense of a physical asset throughout its lifespan.