Clear Restorations Purchased a Floor Machine for $10,520

question 23

Multiple Choice

Clear Restorations purchased a floor machine for $10,520. Delivery costs totaled $1,250. The salvage value is $1,350 after 8 years. Using the straight-line depreciation method, calculate the book value at the end of year 5.

• A) $1,302.50
• B) $5,257.50
• C) $6,512.50
• D) $7,525.50

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with cheaper alternatives.

Income Effect

The change in an individual's consumption patterns due to a change in their real income, typically following a price change of goods.

Indifference Curve

A graph showing a combination of two goods that give a consumer equal satisfaction and utility, representing preferences without implying greater or lesser utility.

Convex

A shape that curves outward, or a mathematical concept that implies a set or function that holds certain properties related to this outward curvature.