A Machine Was Purchased on January 1 for $100,000

question 64

Multiple Choice

A machine was purchased on January 1 for $100,000. The machine has an estimated useful life of 5 years with a salvage value of $20,000. Under the straight-line method, the book value and the accumulated depreciation of the machine at the end of year two is respectively,

• A)$60,000 and $40,000
• B)$68,000 and $32,000
• C)$40,000 and $60,000
• D)$48,000 and $32,000

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Definitions:

Disposable Income

The economic resources households are left with for spending and saving after income tax charges.

Autonomous Consumption

The level of consumption that occurs when income levels are zero, reflecting basic consumption needs that do not depend on income.

Autonomous Consumption

Autonomous consumption is the level of consumption that occurs when income levels are zero, reflecting the basic level of consumption that is needed for survival.

Disposable Income

Post-tax disposable income that households can allocate for spending and saving.