A Company Paid $500,000 to Purchase Equipment and $15,000 to Have

question 133

Multiple Choice

A company paid $500,000 to purchase equipment and $15,000 to have the equipment delivered to and installed in the company's production facilities. Commercial use of the equipment began on May 1, 2011. The estimated residual value of the equipment is $5,000. The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of six years. The company has an October 31, 2011 year-end and had used the equipment a total of 11,200 hours prior to the year-end. Using the units- of- production method, what amount of depreciation expense (to the nearest thousand) would the company report for this equipment in the income statement prepared for the year-ended October 31, 2011?

• A) $102,000
• B) $198,000
• C) $204,000
• D) $206,000

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Definitions:

Insight

The ability to understand the inner nature of things or to intuitively grasp complex situations.

Transference

A psychological phenomenon where feelings, desires, and expectations of one person are redirected and applied to another person, often occurring in patient-therapist relationships.

Analyst

A professional who examines and evaluates data in a specific field to generate insights, forecasts, or recommendations.

Feelings

Emotional states or reactions that are experienced subjectively and are often expressed through thoughts and behavior.