Use the Following Information for Questions 108 and 109

question 107

Multiple Choice

Use the following information for questions 108 and 109.
A machine cost $600,000, has annual depreciation of $100,000, and has accumulated depreciation of $450,000 on December 31, 2014. On April 1, 2015, when the machine has a fair value of $137,500, it is exchanged for a machine with a fair value of $675,000 and the proper amount of cash is paid. The exchange had commercial substance.
-The new machine should be recorded at

• A) $537,500.
• B) $612,500.
• C) $662,500.
• D) $675,000.

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Definitions:

Manufacturing Overhead Applied

The allocation of overhead costs to the goods produced, based on a predetermined overhead rate.

Job-order Costing

A cost accounting system that accumulates manufacturing costs separately for each job.

Direct Labour Cost

The wages and benefits paid to employees who are directly involved in the production of goods or services.

Manufacturing Overhead Applied

The portion of estimated manufacturing overhead costs that is assigned to each unit of production, based on a predetermined rate.