Mercury Company Reports Depreciation Expense of $40,000 for Year 2

question 81

Multiple Choice

Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.
$$\begin{array} { | l | l | l | } \hline \text { At December 31 } & { \text { Year 2 } } & \text { Year 1 } \\\hline \text { Equipment } & \$ 600,000 & \$ 750,000 \\\hline \text { Accumulated Depreciation-Equipment } & 428,000 & 500,000 \\\hline\end{array}$$

• A) $68,000.
• B) $32,000.
• C) $38,000.
• D) $36,000.
• E) $40,000.

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing, including equipment maintenance, utilities, and factory management salaries.

Estimated Total

A calculated approximate value representing the total amount or quantity of something, often used in planning or forecasting.

Predetermined Overhead Rate

An estimated overhead rate used to allocate manufacturing overhead costs to products or job orders, calculated before the costs are incurred.

Job Cost Sheet

A document that records the costs associated with a specific job or project, detailing direct materials, direct labor, and manufacturing overhead.