Grape Corporation Purchased a Machine in December of the Current

question 9

Multiple Choice

Grape Corporation purchased a machine in December of the current year.This was the only asset purchased during the current year.The machine was placed in service in February of the following year.No assets were purchased in the following year.Grape Corporation's cost recovery would begin:

• A)In the current year using a mid-quarter convention.
• B)In the current year using a half-year convention.
• C)In the following year using a mid-quarter convention.
• D)In the following year using a half-year convention.
• E)None of the above.

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Definitions:

Accounts Receivable Turnover

A financial ratio indicating how many times a company's accounts receivable are collected during a specific period, typically a year.

Current Assets

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

Short-Term Debt-Paying

Refers to a company's ability to meet its short-term financial liabilities and obligations.

Acid-Test

A stringent financial ratio that measures the ability of a company to pay off its current liabilities with its most liquid assets (cash, marketable securities, and accounts receivable).