Babineaux Company incurred the following costs in May 2010: •Paid a six-month (M
ID: 2387464 • Letter: B
Question
Babineaux Company incurred the following costs in May 2010:•Paid a six-month (May through October) premium for insurance of company headquarters, $18,600.
•Paid $1,000 fee for a salesperson to attend a seminar in July.
•Paid three months (May through July) of property taxes on its factory building, $15,000.
•Paid a $10,000 bonus to the company president for his performance during May 2010.
•Accrued $20,000 of utility costs, of which 40 percent was for the headquarters and the remainder was for the factory.
a. What expired period costs are associated with the May information?
$
b. What unexpired period costs are associated with the May information?
$
c. What product costs are associated with the May information?
$
d. Discuss why the product cost cannot be described specifically as expired or unexpired in this situation.
Explanation / Answer
'An expired cost is defined as the expense incurred during a period when benefits were received. It is a cost that has been recognized as an expense. When an entity fully consumes or receives benefit from a cost it is an expired cost. An expired cost may also be considered as the total loss in value of an asset. The depreciation expense is an example of expired cost which is used for an asset that is used in the production process expires when goods are so' a. Expired period cost for May: Insurance: 18,600/6 = 3,100 Prepaid tax: 15,000/3 = 5,000 Bonus: 10,000 Utility: 20,000 Total = 38,100 b Unexpired cost for May: Insurance: 18,600 - 3,100 = 15,500 Professional expense (for seminar): 1,000 Prepaid tax: 15,000 - 5,000 = 10,000 Total = 26,500 c & d I'm not exactly sure for this company's product cost, because there is no information about what this company produces. But this http://www.accountingtools.com/questions-and-answers/what-is-product-cost.html would probably help you get the answer. Sorry! Hope that helps! :)
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