An Asset Is Purchased on January 1 for $40,000

question 34

Multiple Choice

An asset is purchased on January 1 for $40,000. It is expected to have a useful life of five years after which it will have an expected salvage value of $5,000. The company uses the straight -line method. If it is sold for $30,000 exactly two years after its purchased, the company will record a:

• A) gain of $6,000.
• B) gain of $4,000.
• C) loss of $4,000.
• D) loss of $6,000.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus, reflecting the total net benefit to society from the production and consumption of a good or service.

Equilibrium

A condition where the supply and demand in the market are equal, leading to stable prices.

Pumpkin Market

A hypothetical or specific market segment dealing with the trading of pumpkins.

Total Surplus

Total surplus is the sum of consumer surplus and producer surplus in a market, representing the total benefits to society, including both the gains from trade to buyers and sellers.