A Machine with a Five-Year Estimated Useful Life and an Estimated

question 43

Multiple Choice

A machine with a five-year estimated useful life and an estimated 10% residual value was acquired on January 1, 2009.The depreciation expense for 2011 using the double-declining balance method would be original cost multiplied by

• A)90% × 40% × 40%.
• B)60% × 60% × 40%.
• C)90% × 60% × 40%.
• D)40% × 40%.

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Definitions:

Cash Delivery

The process of settling a futures or options contract by exchanging the cash equivalent of the asset rather than the physical asset itself.

Futures Contracts

Futures contracts are standardized legal agreements to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other.

Forward Contracts

Agreements to buy or sell an asset at a future date for a price specified today, not traded on an exchange.

Counterparty Risk

The risk that the other party in an agreement will default or fail to live up to their contractual obligations.