Dynatech Corporation Acquired a Piece of Machinery on January 3,2010

question 88

Multiple Choice

Dynatech Corporation acquired a piece of machinery on January 3,2010.The total cost of the machinery was $172,500.Dynatech estimated that the machinery would be used for 60,000 hours before being sold for an estimated $7,500.Dynatech uses the units-of-production method of depreciation.Assuming the machine was used for 18,750 hours during the year ended December 31,2010,the depreciation expense rate per hour for 2010 was:

• A)$9.20
• B)$8.92
• C)$2.88
• D)$2.75

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Definitions:

Liquidity Risk

The risk that an entity may be unable to convert its assets to cash quickly without significant loss in value, impacting its ability to meet its short-term obligations.

Default Risk

The possibility that a borrower will be unable to make the required payments on their debt obligations.

Maturity Risk

The risk associated with the length of time until the face value of a bond or other debt instrument is repaid, affecting its price and yield.

Bond Investing

The process of investing in bonds, which are debt securities, to earn a return from interest payments and potential price appreciation.