On January 1, 2018, Payton Co

question 22

Multiple Choice

On January 1, 2018, Payton Co.sold equipment to its subsidiary, Starker Corp., for $115,000.The equipment had cost $125,000, and the balance in accumulated depreciation was $45,000.The equipment had an estimated remaining useful life of eight years and $0 salvage value.Both companies use straight-line depreciation.On their separate 2018 income statements, Payton and Starker reported depreciation expense of $84,000 and $60,000, respectively.The amount of depreciation expense on the consolidated income statement for 2018 would have been:

• A) $144,000.
• B) $148,375.
• C) $109,000.
• D) $134,000.
• E) $139,625.

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Definitions:

Unit Product Cost

The calculated expense for producing a single unit, taking into account all costs of production from raw materials to finished goods.

Unit Product Cost

The total cost, including materials, labor, and overhead, to produce a single unit of a product.

Activity-Based Costing

Activity-based costing is a method of assigning indirect costs to products and services based on the activities they require.

Predetermined Overhead Rate

A calculated rate used to allocate manufacturing overhead costs to products based on a certain activity base like labor hours or machine hours.