A Sawmill Bought a Shipment of Logs for $40,000 $\begin{array} { l l l } & \text { Type1 } & \text { Type 2 } \\\end{array}$

question 130

Short Answer

A sawmill bought a shipment of logs for $40,000.When cut,the logs produced 1 million board feet of lumber in the following grades:
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.
How much cost should be allocated to Type 1 and Type 2,respectively?
$\begin{array} { l l l } & \text { Type1 } & \text { Type 2 } \\\end{array}$
A. $\begin{array} { l l l } & \$ 16,000 & \$ 16,000 \\\end{array}$
B. $\begin{array} { l l l } & \$ 13,333 & \$ 4,444 \\\end{array}$
C. $\begin{array} { l l l } & \$ 40,000 & \$ 24,000 \\\end{array}$
D. $\begin{array} { l l l } &\$ 24,000 & \$ 12,000 \\\end{array}$
E. $\begin{array} { l l l } &\$24,000&\$ 8,000\end{array}$

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Definitions:

Consolidation Purposes

The process in accounting where the financial statements of a parent company and its subsidiaries are combined to present as one entity for reporting.

Local GAAP

Refers to the Generally Accepted Accounting Principles that are specific to a country, governing how financial statements should be prepared and reported.

U.S. GAAP

The accounting standards and principles specifically used within the United States to guide the preparation of financial statements.

Currency Balances

Refers to the amounts of foreign currencies held by a company at any given time, which can fluctuate due to changes in exchange rates.