Question

Density Farms Inc. had sales of $750,000, cost of goods sold of $200,000, selling and administrative expense of $70,000, and operating profit of $150,000. What was the value of depreciation expense

Answer 1

Based on the costs described and the operating profit, the depreciation expense was $330,000

Depreciation expense

• Is an expense owning to fixed assets losing value.
• Is deducted from the Sales revenue.

You can find the depreciation expense as:

Operating income = Sales - Cost of goods sold - Admin expenses - Depreciation

150,000 = 750,000 - 200,000 - 70,000 - Depreciation

Depreciation = 750,000 - 200,000 - 70,000 - 150,000

= $330,000

In conclusion, depreciation was $330,000.

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