Question

Precision Systems had sales of \(820,000, cost of goods of \)510,000, selling and administrative expense of \(60,000, and operating profit of \)103,000. What was the value of depreciation expense? Set this problem up as a partial income statement and determine depreciation expense as the “plug” figure required to obtain the operating profit.

Short answer

The depreciation expense of Precision Systmen is $147,000.

Step-by-step solution

The following amounts are given

Sales	$820,000
Cost of goods sold	510,000
Selling and administrative expenses	60,000
Operating profit	103,000

Calculation of the depreciation

$\begin{array}{rcl}\mathrm{Depreciation}& =& \mathrm{Sales}-\mathrm{Costs}\mathrm{of}\mathrm{goods}\mathrm{sold}-\mathrm{Selling}\mathrm{and}\mathrm{administrative}\mathrm{expense}-\mathrm{Operating}\mathrm{Profit}\\ & =& \$820,000-\$510,000-\$60,000-\$103,000\\ & =& \$147,000\end{array}$