The Lots More Store Has a Janitorial Department and a Personnel

question 70

Multiple Choice

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments. The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated because of employees. The following information is available.
Using the step-down method, calculate the amount of Personnel Department cost allocated to Sales Department #3, if the Personnel Department is allocated first.

• A) $13 500
• B) $12 857
• C) $12 000
• D) $15 000

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Definitions:

Amortization Methods

Techniques used to gradually write off the initial cost of an intangible asset over its useful life.

Amortization

The gradual reduction of a debt over a specified period of time through regular payments of principal and interest.

Retire Bonds

The process of paying off bond indebtedness before the maturity date, thereby removing the bonds from circulation.

Company

An organization engaged in commercial, industrial, or professional activities, structured as a legal entity.