Machinery Is Purchased for $140 000

question 36

Multiple Choice

Machinery is purchased for $140 000.It is estimated that it has a useful life of 5 years and a residual value of $20 000.Using the straight-line method,calculate the amount of annual depreciation to be charged.

• A) $12 000
• B) $24 000
• C) $28 000
• D) $14 000

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Definitions:

Finished Goods Inventory

The stock of completed products that are ready to be sold.

Underapplied

Describes the situation where the allocated manufacturing overhead is less than the actual manufacturing overhead incurred.

Overapplied

A situation in which the allocated manufacturing overhead cost is more than the actual overhead cost incurred.

Overapplied Manufacturing Overhead

Occurs when the amount of overhead applied to products or jobs during a period is greater than the actual overhead costs incurred.