A Firm Is Considering Purchasing Two Assets

question 39

Multiple Choice

A firm is considering purchasing two assets.Asset A will have a useful life of 15 years and cost $3 million;it will have installation costs of $400,000 but no salvage or residual value.Asset B will have a useful life of 6 years and cost $1.3 million;it will have installation costs of $180,000 and a salvage or residual value of $300,000.Which asset will have a greater annual straight-line depreciation?

• A)Asset A has $30,000 more in depreciation per year.
• B)Asset A has $40,000 more in depreciation per year.
• C)Asset B has $30,000 more in depreciation per year.
• D)Asset B has $40,000 more in depreciation per year.

---

Definitions:

Contingent Liabilities

Liabilities that may arise from past transactions if certain events occur in the future.

Past Transactions

Historical financial activities that have occurred and been recorded within a business.

Defined Contribution Plans

A type of retirement plan in which the employer, employee, or both make contributions to an individual's retirement account, with future benefits depending on the investment's performance.

401k Plan

A retirement savings plan sponsored by an employer that allows employees to save and invest a piece of their paycheck before taxes are taken out.