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

---

Definitions:

Beneficiary Modification

Changes made to the designated recipient of benefits or entitlements under a legal instrument such as a will or insurance policy.

Gifts

Voluntary transfers of property or funds from one person to another without any expectation of payment or compensation.

Fraud

Intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.

Account Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.