View the step-by-step solution to:

Depreciation Building Intereat Building mortgage $22,500 Taxes Building and land Gas (heating) expense Lighting expense Maintenance expense 6,875

In a two-storied building, both the floors are occupied by State Bank's various departments. Building Occupancy Cost is the only account reflecting in the accounts of the bank under departmental accounting system. The several types of occupancy costs recorded in this account for the current period is as follows.

 

Q 8 Accountancy.png

 

The building has 5,000 square feet on each floor. Earlier, an average cost of $8 per square foot was calculated by divided the $80,000 occupancy cost by 10,000 square feet and then charged each department a building occupancy cost equal to this rate times the number of square feet that it occupied. John manages a first-floor department that occupies 1,100 square feet, and Ronnie manages a second-floor department that occupies 1,700 square feet of floor space. In managerial discussions, 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. Ronnie also made a reference to 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 $10 per square foot (excluding costs for heating, lighting, and maintenance).

Q 8 Accountancy.png

Depreciation Building Intereat Building mortgage $22,500 Taxes Building and land Gas (heating) expense Lighting expense
Maintenance expense 6,875
Total occupancy cost $80,000

Top Answer

In a two-storied building, both the floors are occupied by State Bank's various departments. Building Occupancy Cost is the... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online