Red CorpConstructed a Machine at a Total Cost of $70 Million

question 124

Multiple Choice

Red Corp.constructed a machine at a total cost of $70 million.Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013.The machine was being depreciated over a 10-year life using the straight-line method.The residual value is expected to be $4 million.At the beginning of 2016,Red decided to change to the sum-of-the-years'-digits method.Ignoring income taxes,what will be Red's depreciation expense for 2016?

• A)$ 4.8 million.
• B)$ 5.4 million.
• C)$ 6.6 million.
• D)$11.55 million.

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Definitions:

Chance Variation

Variations in observations or data that result from random effects or events that cannot be controlled or predicted.

Sample Mean

The average value of a sample set of numbers, calculated by adding all the values and dividing by the number of values.

Control Limits

The boundaries in a control chart beyond which points indicate a statistical process is out of control.

Standard Errors

Measures of the statistical accuracy of an estimate, indicating the variability of an estimate from sample to sample.