Reynardo Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review of the company's accounting records should reveal a:
A) debit to Depreciation Expense for $90,000.
B) debit to Manufacturing Overhead for $90,000.
C) debit to Manufacturing Overhead for $72,000.
D) debit to Work-in-Process Inventory for $18,000.
E) credit to Cash for $90,000.

Question

Quizplus · Accepted Answer

Since 80% of the depreciation relates to the production facilities, it should be allocated to the Manufacturing Overhead account. Therefore, the correct entry would be a debit to Manufacturing Overhead for $72,000 (80% of $90,000). The remaining 20% of the depreciation, which relates to sales and administrative offices, should be allocated to the period expenses and recorded as a debit to Depreciation Expense for $18,000. None of the other answer choices accurately reflect the proper allocation of depreciation.

Reynardo Company Incurred $90,000 of Depreciation for the Year