Wilson Owned Equipment with an Estimated Life of 10 Years

question 46

Multiple Choice

Wilson owned equipment with an estimated life of 10 years when it was acquired for an original cost of $80,000. The equipment had a book value of $50,000 at January 1, 2010. On January 1, 2010, Wilson realized that the useful life of the equipment was longer than originally anticipated, at ten remaining years. On April 1, 2010 Simon Company, a 90% owned subsidiary of Wilson Company, bought the equipment from Wilson for $68,250 and for depreciation purposes used the estimated remaining life as of that date. The following data are available pertaining to Simon's income and dividends: Compute the amortization of gain through a depreciation adjustment for 2011 for consolidation purposes.

• A) $1,950.
• B) $1,825.
• C) $2,000.
• D) $1,500.
• E) $7,000.

Identify the sensitivity measures (Greeks) in option pricing and their significance.

Recognize the factors influencing the value of options at expiration.

Understand the conditions for an option to be in the money, at the money, or out of the money.

Explain the effect of market conditions on option value.

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Definitions:

Background Extinction

The continuous, low-level extinction of species that has occurred throughout much of the history of life. Compare with mass extinction.

Continuous

A term used to describe a non-interrupted or unbroken series, sequence, or progression.

Low-Level

Referring to a minimal or reduced amount or degree in a given context.

Allopatric

Describes a mode of speciation that occurs when biological populations of the same species become isolated from each other to an extent that prevents or interferes with genetic interchange.