Equipment with a Cost of $160,000, an Estimated Residual Value

question 69

Multiple Choice

Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

• A) $11,636
• B) $16,000
• C) $11,000
• D) $8,000

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Definitions:

Operating Working Capital

Represents the cash used in the day-to-day operations of a business, excluding non-cash assets and liabilities.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or a normal operating cycle, whichever is longer.

Short-term Notes

Debt securities with shorter maturities, typically less than one year, used by companies to meet immediate financing needs.

Depreciation Calculations

Methods used to allocate the cost of a tangible asset over its useful life, reflecting its decrease in value.