During 2018, Dragon Company Determined, Based on New Information, That

question 18

Multiple Choice

During 2018, Dragon Company determined, based on new information, that equipment previously depreciated using a ten-year life and a salvage value of $100,000 had a total estimated life of only six years and a salvage value of $50,000. The equipment was acquired on January 1, 2016 at a cost of $600,000, and was depreciated using the straight-line method. Dragon made an accounting change in 2018 to reflect this additional information, and the change was approved by the IRS. Dragon has an income tax rate of 30%. Dragon's income before depreciation, before income taxes, and before any retroactive effect of the accounting change if any) for the year ended December 31, 2018, was $180,000. What is the amount of Dragon's net income for 2018?

• A) $80,000
• B) $67,500
• C) $56,000
• D) $47,250

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Definitions:

Minimum Price

The lowest possible price at which a good or service can be sold, often set by legal or regulatory authorities to protect producers or consumers.

Deadweight Loss

A loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved or is not achievable.

Government Cost

Government cost refers to the expenses incurred by the government in the course of its operations, including public services, defense, infrastructure, and social programs.

Minimum Wage

The lowest legal salary that employers can pay workers, set by government legislation.