Consider an Asset That Was Separated into Its Main Components

question 7

Multiple Choice

Consider an asset that was separated into its main components (A, B, and C) . The $1,200,000 purchase price was allocated to these components in equal proportions. The useful lives are 12, 4, and 7 years for components A, B, and C respectively. Components A and B are not expected to have any residual value, but Component C is expected to have a residual value of $18,000. Assuming straight-line depreciation, total annual depreciation expense, to the nearest dollar, relating to these assets is

• A) $100,100.
• B) $125,120.
• C) $187,905.
• D) $190,476.

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Definitions:

Shorting Index Futures

A strategy involving selling index futures contracts in anticipation of a decline in the index's value to profit from falling market prices.

Foreign Currency

The currency of another country that is required to conduct foreign trade and business transactions.

Futures Contract

A legal document that obligates parties to buy or sell a commodity at a price determined in advance, on a specified future date.

Assembly

The process of putting together various components or parts to form a finished product.