A Company Purchased Equipment for $100,000 in 2012

question 53

Multiple Choice

A company purchased equipment for $100,000 in 2012.The machine will be used for 10,000 hours and will have a residual value of $20,000.The equipment was used for 2,400 hours in 2012.How much depreciation will be recorded in 2012 if the company elects the units-of-production method?

• A) $19,200
• B) $20,000
• C) $10,000
• D) $24,000

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Definitions:

Deferred Charges

Costs or expenses that are incurred in one period but are not reported until a future period on the income statement.

Balance Sheet

An account statement that outlines the financial position of a company, including what it owns, owes, and the equity interest of its investors at a given time.

Fair Value Measurements

Assessments of the estimated market value of an asset or liability, based on assumptions about risk and the valuation techniques used.

GAAP Hierarchy

A framework that categorizes the importance and authority of different accounting principles and guidelines in the U.S. Generally Accepted Accounting Principles (GAAP).