Table 5-5
the Following Items Were Taken from the December

question 173

Multiple Choice

Table 5-5
The following items were taken from the December 31, 2019, records of Speedy Boat Company, which uses a periodic inventory system: $$\begin{array} { | l | r | } \hline \text { Salary payable } & \$ 1,100 \\\hline \text { Sales revenue } & 480,000 \\\hline \text { Interest revenue } & 3,000 \\\hline \text { Freight in } & 20,000 \\\hline \text { Beginning inventory } & 35,000 \\\hline \text { Sales discounts } & 18,000 \\\hline \text { Purchases of inventory } & 240,000 \\\hline \text { Purchase retarns and allowances } & 35,000 \\\hline \text { Purchase discounts } & 10,000 \\\hline \text { Sales returns and allowances } & 35,000 \\\hline \text { Ending inventory } & 80,000 \\\hline \text { Operating expenses } & 85,000 \\\hline \text { Interest expense } & 7,000 \\\hline \text { Owner withdrawals } & 12,000 \\\hline\end{array}$$
-Refer to Table 5-5. The operating income for Speedy Boat Company is:

• A)$156,000.
• B)$172,000.
• C)$168,000.
• D)$160,000.

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Definitions:

Depreciation

A process for spreading out the expense of a physical asset across its lifespan.

Residual Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, distributing its cost evenly across its useful life.

Depreciable Cost

The cost of a fixed asset minus its estimated salvage value, which is the basis for calculating depreciation expense.