Use the Following Data to Answer Questions 5 Through 9

question 61

Multiple Choice

Use the following data to answer questions 5 through 9:
Davis Company purchased a new piece of equipment on July 1, 2014 at a cost of $1,800,000. The equipment has an estimated useful life of 5 years and an estimated salvage value of $150,000. The current year end is 12/31/15. Davis records depreciation to the nearest month.
-If Davis expensed the total cost of the equipment at 7/1/14, what was the effect on 2014 and 2015 income before taxes, assuming Davis uses straight-line depreciation?

• A) $1,470,000 understated and $330,000 overstated.
• B) $1,620,000 understated and $180,000 overstated.
• C) $1,635,000 understated and $330,000 overstated.
• D) $1,800,000 understated and $180,000 overstated.

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Definitions:

Overall Service

A term referring to the totality of services provided by an organization, assessed based on quality, efficiency, and customer satisfaction.

Pie Chart

A pie chart segmented into slices to illustrate the percentages of a total.

Frequency Bar Chart

A graphical representation of data where the frequency or count of occurrences of values are represented by bars.

Political Affiliation

An individual's formal identification or allegiance with a political party or movement.