The Following Beginning and Ending Balances Were Drawn from the Records

question 6

Multiple Choice

The following beginning and ending balances were drawn from the records of Allen Co.

If Allen Co.sold equipment that had an original cost of $175,000 and accumulated depreciation of $75,000 for $62,500,how much did Allen pay for new equipment?

• A)$12,500
• B)$25,000
• C)$100,000
• D)$250,000

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Definitions:

Work In Process

Work in process are goods in various stages of production within a factory, not yet completed to become finished goods.

First-In, First-Out

An inventory valuation method where goods first purchased or produced are the first to be sold or used, assuming the earliest inventory costs flow out first.

Conversion Costs

Conversion costs are manufacturing or production costs that include direct labor and overhead expenses, necessary to convert raw materials into finished goods.

Equivalent Units

Equivalent units refer to a conversion measure used in cost accounting to express the amount of work done by manufacturers on units that are only partially completed at the end of an accounting period.