An Asset Being Amortized with the Straight-Line Method Has a Residual

question 188

Multiple Choice

An asset being amortized with the straight-line method has a residual value of $20,000 and amortization expense of $25,000 in its second year. What was the original cost of the asset if its useful life was 10 years?

• A) $185,000
• B) $200,000
• C) $250,000
• D) $270,000

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Definitions:

Finished Goods Inventory

The stock of completed products that are ready to be sold but haven't been yet.

Direct Cost

A cost that can be easily and conveniently traced to a specified cost object.

Packaging

The process and materials used to protect, transport, and present goods for sale.

Leasing A Machine

Leasing a machine entails entering into a rental agreement to use a piece of equipment for a specified period in exchange for regular payments, without purchasing it outright.