On January 1, Comicon Corp

question 84

Multiple Choice

On January 1, Comicon Corp. purchased land with a usable building on it for $300,000. At the time of purchase, the fair market values of the land and building were $100,000 and $150,000, respectively. Comicon depreciates the building using the straight-line method over 20 years with an expected $24,000 residual value. The annual depreciation expense on the building is:

• A) $0.
• B) $5,000.
• C) $7,800.
• D) $10,800.

---

Definitions:

Absorption Costing

An approach in accounting that comprises all costs of manufacturing, like direct materials, direct labor, and both types of manufacturing overheads (variable and fixed), in determining a product's cost.

Overproduction

The creation of more products or goods than are needed, leading to excess inventory and potential waste.

Variable Costing

An accounting approach that solely accounts for variable production expenses like direct materials, direct labor, and variable manufacturing overhead in the calculation of product costs.

Limitations

The constraints or restrictions that hinder a process, investigation, or analysis.