Royal Company Purchased a Dump Truck at the Beginning of 2015

question 192

Multiple Choice

Royal Company purchased a dump truck at the beginning of 2015 at a cost of $60,000.The truck had an estimated life of six years and an estimated residual value of $24,000.On January 1,2017,the company made major repairs of $20,000 to the truck that extended the life one year.Thus,starting with 2017,the truck has a remaining life of five years and a new salvage value of $8,000.Royal uses the straight-line depreciation method.What amount should be recorded as depreciation expense each year starting in 2017?

• A)$6,000
• B)$12,000
• C)$13,600
• D)$14,400

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Definitions:

Designated Securities

These are specific securities that have been selected for a special purpose, such as being eligible collateral for a loan or part of a regulated market segment.

Moral Hazard

The situation where one party to an agreement can take risks because they know that another party bears the consequences of those risks, often seen in insurance and finance.

Unfavorable Information

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Professionals who examine and verify a company’s financial records and practices to ensure accuracy and compliance with accounting standards and regulations.