A Machine with a Cost of $120,000 Has an Estimated

question 197

Multiple Choice

A machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of five years or 15,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

• A) $5,000
• B) $35,000
• C) $21,000
• D) $45,000

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Definitions:

Demand Shift

A change in consumer desire that moves the demand curve to the right (increase) or left (decrease) in a market.

Negative Profits

A financial condition also known as losses, occurring when a company's expenses exceed its revenues.

Profit-Maximizing

The strategic process used by businesses to determine the price and output level that generates the most profit.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a specified period of time.