Mercury Company Reports Depreciation Expense of $40,000 for Year 2

question 162

Multiple Choice

Mercury Company reports depreciation expense of $40,000 for Year 2.Also,equipment costing $150,000 was sold for its book value in Year 2.There were no other equipment purchases or sales during the year.The following selected information is available for Mercury Company from its comparative balance sheet.Compute the cash received from the sale of the equipment. $\begin{array}{lrr}\text { At December 31 } & \text { Year 2 } & \text { Year 1 } \\\text { Equipment } & \$ 600,000 & \$ 750,000 \\\text { Accumulated Depreciation-Equipment } & 428,000 & 500,000\end{array}$

• A)$32,000.
• B)$68,000.
• C)$38,000.
• D)$40,000.
• E)$36,000.

Evaluate the collection period and its impact on cash flows.

Understand the concept of accounts receivable financing and its effect on business operations.

Recognize the significance of accounts payable period in managing cash flows.

Explain the concept of the operating cycle and its components.

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Definitions:

Formal Operations

Formal operations is a stage in Piaget's theory of cognitive development, where individuals gain the ability to think abstractly, logically, and systematically.

Abstract Operational Stage

This term combines aspects of Piaget's concrete operational and formal operational stages, but correctly, it's the formal operational stage, where adolescents and adults think abstractly, reason logically, and plan systematically.

Tertiary Circular Reactions

A cognitive developmental stage in Piaget's theory, occurring around 12 to 18 months, where infants experiment with new activities and explore the outcomes.

Sensorimotor Period

The first stage in Jean Piaget's theory of cognitive development, occurring from birth to about age 2, where infants learn through sensory experiences and manipulating objects.