During 2014, Duncan Company Purchases and Places in Service Office

question 18

Multiple Choice

During 2014, Duncan Company purchases and places in service office equipment with a cost of $40,000. The equipment is 7-year MACRS property with an ADS recovery period of 10 years. Duncan desires to avoid the AMT. What is its minimum 2014 depreciation deduction?

• A) $ 2,000
• B) $ 2,857
• C) $ 3,000
• D) $ 4,000
• E) $ 5,714

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Definitions:

AVC

Average Variable Cost, the total variable costs (labor, materials, etc.) divided by the quantity of output produced, illustrating how variable costs change with the level of output.

Shutdown Point

The point where a firm's revenue is not enough to cover its variable costs, leading to a decision to cease production temporarily.

Short Run

In economics, a period during which at least one input, like factory size or machinery, is fixed and cannot be changed, as opposed to the long run where all factors can be varied.

Long Run

A period in economic analysis where all inputs can be adjusted and there are no fixed factors of production.