A Company Purchased a Computer System on March 1

question 163

Multiple Choice

A company purchased a computer system on March 1.Its cost was $35,000 and it had an estimated salvage value of $5,000.It was expected to have a useful life of four years.To the nearest dollar,the depreciation for year 2 using straight-line depreciation will be:

• A)$8,750.
• B)$7,500.
• C)$6,250.
• D)$5,625.

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Definitions:

Noncash Deductions

Expenses that reduce a company's taxable income but do not involve an actual cash outflow, such as depreciation and amortization.

Net Working Capital

Represents the difference between a company's current assets and current liabilities, indicating the liquidity of the business.

Pro Forma Statements

Financial statements that project the future financial performance of a company, based on certain assumptions.

Long-Term Debt

Debt with a maturity of more than one year, used to finance or capitalize lasting investments.