National Bank has
several departments that occupy both floors of a two-story
building. The departmental accounting system has a single account,
Building Occupancy Cost, in its ledger. The types and amounts of
occupancy costs recorded in this account for the current period
follow.
Depreciation—Building | $ | 22,500 | |
Interest—Building mortgage | 33,750 | ||
Taxes—Building and land | 10,000 | ||
Gas (heating) expense | 3,125 | ||
Lighting expense | 3,750 | ||
Maintenance expense | 6,875 | ||
Total occupancy cost | $ | 80,000 | |
The building has 5,000 square feet on each floor. In prior periods,
the accounting manager merely divided the $80,000 occupancy cost by
10,000 square feet to find an average cost of $8 per square foot
and then charged each department a building occupancy cost equal to
this rate times the number of square feet that it occupied.
Diane Linder manages a first-floor department that occupies 1,100
square feet, and Juan Chiro manages a second-floor department that
occupies 1,900 square feet of floor space. In discussing the
departmental reports, the second-floor manager questions whether
using the same rate per square foot for all departments makes sense
because the first-floor space is more valuable. This manager also
references a recent real estate study of average local rental costs
for similar space that shows first-floor space worth $40 per square
foot and second-floor space worth $20 per square foot (excluding
costs for heating, lighting, and maintenance).
2.
Allocate the depreciation, interest, and taxes occupancy costs to
the Linder and Chiro departments in proportion to the relative
market values of the floor space. Allocate the heating, lighting,
and maintenance costs to the Linder and Chiro departments in
proportion to the square feet occupied (ignoring floor space market
values). (Round cost answers to 2 decimal places. Round
your intermediate calculations to 2 decimal
places.)
Department | Square Footage | Rate | Total |
Linder's Department | 1,100 | $10.18 | $11,198 |
Chiro's Department | 1,900 | $5.78 | $10,982 |
Explanation:-
Space Occupied | Value | |
First Floor | 5,000 | $200,000 (5,000 × $40) |
Second Floor | 5,000 | $100,000 (5,000 ×$20) |
Total | 10,000 | $300,000 |
Depreciation, interest, taxes ($22,500 + $33,750 + 10,000) | $66,250 |
Allocation base | $300,000 |
Cost per $ of value ($66,250/$300,000) | $0.22 |
Cost per square foot (first floor) | $8.8 ($0.22 × $40) |
Cost per square foot (second floor) | $4.4 ($0.22 ×$20) |
Heating, lighting and maintenance ($3,125 + $3,750 + $6,875) | $13,750 |
Allocation base | 10,000 |
Cost per square feet ($13,750/10,000) | $1.375 |
Department | Square Footage | Rate | Total |
Linder's Department | 1,100 | $10.18 ($8.8 + $1.375) | $11,198 (1,100 × $10.18) |
Chiro's Department | 1,900 | $5.78 ($4.4 + $1.375) | $10,982 (1,900 × $5.78) |
National Bank has several departments that occupy both floors of a two-story building. The departmental accounting...
National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow. Depreciation—Building $ 22,500 Interest—Building mortgage 33,750 Taxes—Building and land 10,000 Gas (heating) expense 3,125 Lighting expense 3,750 Maintenance expense 6,875 Total occupancy cost $ 80,000 The building has 5,000 square feet on each floor. In prior periods,...
National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow Depreciation-Building Interest-Building mortgage Taxes-Building and land Gas (heating) expense Lighting expense Haintenance expense Total occupancy cost $27,000 40, 500 12,000 3, 750 4, 500 8,250 $96, 000 The building has 6,000 square feet on each floor. In...
Required information [The following information applies to the questions displayed below National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow. Depreciation Building Intereat-Building mortgage Taxes Building and land Gas (heating) expense Lighting expense Maintenance expense $18,000 27,000 9,000 3,000 3,000 6,000 $66,000 Total oceupancy coat The...
Problem 22-2A Allocation of building occupancy costs to departments LO P2 [The following information applies to the questions displayed below.] National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow Depreciation-Building Interest-Building mortgage Taxes-Building and land Gas (heating) expense Lighting expense Maintenance expense $18,000 27,000 8,000 2,500...
Required information [The following information applies to the questions displayed below.] National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow. Depreciation—Building $ 36,000 Interest—Building mortgage 54,000 Taxes—Building and land 16,000 Gas (heating) expense 5,000 Lighting expense 6,000 Maintenance expense 11,000 Total occupancy cost $ 128,000...
Required information [The following information applies to the questions displayed below.) National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow. Depreciation-Building $27,000 Interest-Building 40,500 mortgage Taxes-Building and 12,000 land Gas (heating) expense 3,750 Lighting expense 4,500 Maintenance expense 8,250 Total occupancy cost $96,000 The building has...
Required information [The following information applies to the questions displayed below) National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow NI $ 13,500 20.250 9,250 6,000R R Depreciation-Building Interest-Building mortgage Taxes-Building and land Gas (heating) expense Lighting expense Maintenance expense Total occupancy cost 1,875 2.250 4,125...
Required Information [The folowing information applles to the questions displayed below National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, In Its ledger. The types and amounts of occupancy costs recorded in this account for the current perlod follow Depreciation-Building Interest-Building mortgage Taxes-Building and land Gas (heating) expense Lighting expense Maintenance expense Total oeeupancy cost $ 18,000 2,000 8,000 2, 500 3,000 5, 500 $...
Required Information Problem 22-2A Allocation of building occupancy costs to departments LO P2 [The following information applies to the questions displayed below.) National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, In its ledger. The types and amounts of occupancy costs recorded In this account for the current period follow Depreciation Building Interest-Building mortgage Taxes-Building and land Gas (heating) expense Lighting expense Maintenance expense Total...
system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for the current period follow. $27,000 40,500 12,000 3,750 4,500 8,250 and land Gas ( cost building occupancy cost equal to this rate times the number of square feet that it occupied costs for heating, lighting, and maintenance). proportion to the square feet occupied (ignoring floor space market values). (Round cost answers to 2 decimal places. Round your...