On January 1, 2011, Kinnear Company Purchased Equipment at a Cost

question 113

Multiple Choice

On January 1, 2011, Kinnear Company purchased equipment at a cost of $20,000. The equipment has an estimated useful life of 5 years and a salvage value of $2,000. Kinnear Company uses the straight-line depreciation method for all its assets. Given this information, if Kinnear Company scraps the equipment on December 31, 2012, it will have a loss of

• A) $18,000
• B) $0
• C) $12,800
• D) $5,600

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Definitions:

Predetermined Overhead Rate

A calculated rate intended for the allocation of manufacturing overhead to products, based on a specific activity or cost driver.

Machine-Hours

A unit of measure representing the operation of a machine for one hour, often used in manufacturing for costing purposes.

Machining Department

A specific section within a manufacturing facility where machining processes such as cutting, shaping, and drilling materials take place.

Finishing Department

The last stage in the manufacturing process where products are completed, inspected, and prepared for sale or distribution.