Salem Company Hired Kirk Construction to Construct an Office Building

question 45

Multiple Choice

Salem Company hired Kirk Construction to construct an office building for ₤8,000,000 on land costing ₤2,000,000, which Salem Company owned. The building was complete and ready to be used on January 1, 2014 and it has a useful life of 40 years. The price of the building included land improvements costing ₤600,000 and personal property costing ₤750,000. The useful lives of the land improvements and the personal property are 10 years and 5 years, respectively. Salem Company uses component depreciation, and the company uses straight-line depreciation for other similar assets. What is the net amount reported for the building on Salem Company's December 31, 2014 statement of financial position?

• A) ₤7,665,000
• B) ₤7,573,750
• C) ₤6,483,750
• D) ₤7,800,000

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Definitions:

Operations Management

The domain of management tasked with the development and management of production processes and revamping operational methods in the manufacturing of goods or services.

Shewhart

Walter A. Shewhart, an American engineer and statistician recognized as the father of statistical quality control.

Scientific Management Era

describes a period in the early 20th century focusing on improving economic efficiency, especially labor productivity, through systematic scientific studies of work methods.

Operations Management

The administration of business practices to create the highest level of efficiency within an organization.