An Asset Has an Original Basis of $25,000 and Depreciation

question 50

Multiple Choice

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000.If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

• A)$5,000
• B)$10,000
• C)$20,000
• D)$30,000
• E)None of the above

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Definitions:

High-Low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.

Variable Cost

Outlays that move in tandem with the level of production or the scale of sales.

Fixed Costs

Expenses that do not change in proportion to the activities of a business, such as rent and salaries, within a certain period or level of production.

Cost Equation

A formula used to predict the total costs of production, based on fixed and variable costs, as a function of activity levels.