An Asset Being Depreciated with the Straight-Line Method Has a Residual

question 13

Multiple Choice

An asset being depreciated with the straight-line method has a residual value of $10,000 and accumulated depreciation of $30,000 in its second year.What was the original cost of the asset if its useful life was 5 years?

• A)$160,000
• B)$140,000
• C)$ 85,000
• D)$75,000

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Definitions:

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, considering the account type (asset, liability, etc.).

Double-Entry Accounting

A bookkeeping system that records each transaction in two accounts, ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced.

Transaction Recorded Twice

This refers to a bookkeeping error where a financial transaction is mistakenly entered into an accounting system more than once, potentially distorting financial statements.

Liabilities

Debts or financial responsibilities that a company has towards others, requiring settlement via the transfer of economic resources over a period.