A fiRe Destroyed Carl Cramer's Business Automobile

question 52

Multiple Choice

A fire destroyed Carl Cramer's business automobile. Carl originally paid $24,000 for the automobile and up to the time of the fire had been allowed $15,000 in depreciation. Within three months the insurance company replaced the old automobile with a new one which was worth $21,000. What is the basis of the new automobile for purposes of computing depreciation?

• A) $3,000
• B) $9,000
• C) $15,000
• D) $21,000
• E) $24,000

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Definitions:

Estimated Depreciation

The projection of an asset’s decrease in value over time due to wear and use, used for accounting and tax purposes.

Fees Collected

Revenue generated from charging for services provided, professional services, or through administrative fees.

Fiscal Year

A one-year period that companies and governments use for financial reporting and budgeting, which may not align with the calendar year.

Seasonal Variations

Fluctuations in data or activities that occur at similar periods each year due to seasonal factors.