Hershon Inc Component P922 Is Expected to Have a Useful Life of 2

question 180

Multiple Choice

Hershon Inc. acquires a new machine. It is comprised of 2 different identifiable components the P922 and the B14. Each of these components is expected to be overhauled at different intervals. The acquisition cost of the entire machine is as follows:

$\begin{array}{|l|r|}\hline \text { Component P922: } & \$ 198,000 \\\hline \text { Component R14: } & \$ 240,000 \\\hline \text { Total } & \$ 438,000 \\\hline\end{array}$

Component P922 is expected to have a useful life of five years and a residual value of $\$ 20,000$ before the first major overhaul is required. Component R14 is expected to have a useful life of seven years and a residual value of $\$ 15,000$ before its first overhaul.
-Assuming straight-line depreciation, what will be the net book value of component P922 at the end of year five?

• A) $18,000
• B) $20,000
• C) $15,000
• D) $22,000

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