On January 1, 2012, a Machine with a Useful Life

question 109

Multiple Choice

On January 1, 2012, a machine with a useful life of five years and a residual value of $2,500 was purchased for $25,000. Using the double diminishing-balance method, the depreciation expense for the year ending December 31, 2013 would be

• A)$10,000.
• B)$ 9,000.
• C)$ 6,000.
• D)$ 5,400.

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Definitions:

Liquidity

A measure of how easily assets can be converted into cash without affecting their market price.

Current Assets

Assets that a company expects to convert into cash, sell, or consume within one year or its normal operating cycle, whichever is longer.

Current Liabilities

Short-term financial obligations that are due within one year or within a normal operating cycle, such as accounts payable, wages payable, and short-term loans.

Company's Liquidity

The ability of a company to meet its short-term debt obligations, often assessed through liquidity ratios like the current ratio and quick ratio.