Sela Sold a Machine for $140,000

question 1317

Multiple Choice

Sela sold a machine for $140,000. The machine originally cost $90,000 and $10,000 of MACRS depreciation had been allowable. The buyer assumed an existing loan of $40,000, paid $20,000 cash down and agreed to pay $10,000 per year for eight years plus interest. Selling expenses are $10,000. The total gross profit for installment sale recognition purposes is

• A) $50,000.
• B) $60,000.
• C) $30,000.
• D) $40,000.

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Definitions:

Expected Activity

An estimate of the volume of production or service levels a company anticipates, used for budgeting and planning.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities and products based on their usage of resources.

Overapplied Overhead

A situation where the overhead allocated to products or services exceeds the actual overhead incurred.

Cost Of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials and labor.