Kenya Ltd Acquires a New Machine $\begin{array}{llcc} \text { Comportent A: } &\$198,000 \\ \text {Component B: } &\$240,000\\\end{array}$

question 72

Multiple Choice

Kenya Ltd. acquires a new machine. It is comprised of two different components (A and B) that are expected to be overhauled at different times. The acquisition costs of the components are as follows:
$\begin{array}{llcc} \text { Comportent A: } &\$198,000 \\ \text {Component B: } &\$240,000\\\end{array}$


Component A is expected to have a useful life of 5 years and a residual value of $ 20,000 before the first major overhaul is required. Component B is expected to have a useful life of 7 years and a residual value of $ 15,000 before its first overhaul. Kenya uses straight-line depreciation for all its equipment. At the beginning of year 6, component A undergoes a major overhaul at a cost of 100,000. The work is expected to extend its life by 3 years, but the residual value will then be zero. What is the net book value of component A one year after the overhaul?

• A) $ 120,000
• B) $ 80,000
• C) $ 66,667
• D) $ 40,000

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Definitions:

Corporate Decisions

Strategic choices made by a company's management or board of directors regarding the organization's operations, financial strategies, and overall direction.

Stockholders

Individuals or entities that own shares in a corporation, giving them ownership interests and rights such as voting on corporate matters.

Common Stock

Shares of ownership in a corporation, granting holders voting rights and a share in the company's profits through dividends.

Dividends

Profit-based distributions to shareholders from a corporation, typically made from the enterprise's financial gains.