On July 1, 2014, Mendes Corporation Purchased Factory Equipment for $225,000

question 95

Multiple Choice

On July 1, 2014, Mendes Corporation purchased factory equipment for $225,000. Salvage value was estimated to be $6,000. The equipment will be depreciated over five years using the double-declining balance method. Counting the year of acquisition as one-half year, Mendes should record depreciation expense for 2015 on this equipment of

• A) $90,000.
• B) $72,000.
• C) $70,080.
• D) $54,000.

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Definitions:

Novation

In a contract, the substitution of a third party for one of the original parties; the duties remain the same under the contract, but one original party is discharged and the third party takes that original party’s place.

Substituted Contract

An agreement between the contracting parties to replace an existing contract with a new one, possibly altering terms or obligations.

Punitive Damages

Financial compensation awarded in a lawsuit intended to punish the defendant for especially harmful behavior and deter future misconduct.

Liquidated Damages

A predetermined sum of money agreed upon by the parties in a contract to be paid as compensation if one party breaches the contract.