Use the Following Information for Question 166 - 167

question 41

Multiple Choice

Use the following information for question 166 - 167.
Maverick Inc. exchanged an old vehicle for a new vehicle on August 31, 2014. The original cost of the vehicle was $45,000 on January 1, 2010. Depreciation was calculated using the straight line method over a ten-year useful life, with an estimated residual value of $3,000. The fair value of the old vehicle on August 31, 2014 was $21,500. The list price of the new vehicle was $30,000. Maverick received a $24,000 trade in allowance from the dealership and paid $6,000 cash for the new vehicle.
-The new machinery should be recorded on Maverick's books at

• A) $30,000.
• B) $27,500.
• C) $24,000.
• D) $23,500.

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Definitions:

Fixed Manufacturing Overhead

The sum of all production costs that do not change with the level of output, including salaries, rent, and utility expenses of a manufacturing facility.

Absorption Costing

An accounting method that includes both variable and fixed manufacturing overhead costs in the cost of producing goods.

Segmented Income Statement

A segmented income statement breaks down the financial performance of different segments of a business, such as departments or product lines, to analyze each segment's profitability.

Contribution Format

A type of income statement format that separates fixed from variable costs, highlighting the contribution margin.