A Company Purchases for $48,000 an Asset That Has a Useful

question 170

Multiple Choice

A company purchases for $48,000 an asset that has a useful life of six years and no salvage value.After two years,the company spends $8,000 for a major overhaul that will extend the machine's useful life four years beyond the original six.Assuming straight-line depreciation,how much depreciation should be taken in year 3?

• A)$4,000
• B)$5,000
• C)$5,600
• D)$8,000

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Definitions:

Operating Expenses

Costs necessary for a company to conduct its day-to-day operations, excluding the cost of goods sold (COGS).

Transfer Prices

Prices charged for the sale of goods or services between divisions within the same company, often used for cost allocation and performance evaluation.

Segments

Different parts or areas of a business or market that can be separately analyzed.

ROI

Return on Investment is a measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.