The Roger Company Leased a Machine at the Beginning of 2014

question 106

Multiple Choice

The Roger Company leased a machine at the beginning of 2014. The machine was properly capitalized by Roger at $73,734.84. A lease payment of $16,563 is due at the end of each year. The expected life of the machine is seven years, and the term of the lease is five years. At the beginning of 2019, the machine will be returned to the lessor. Both Roger and the lessor use the straight-line method of depreciation. What amount of depreciation expense should Roger record in 2014 for the machine (round calculations up to the nearest dollar) ?

• A) $14,600
• B) $14,747
• C) $16,563
• D) $17,000

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Definitions:

Manufacturing Cost

The total expense related to the production of goods, including raw materials, labor, and overhead costs.

Lot Size

The quantity of goods processed, transported, or ordered at one time, affecting costs, efficiency, and inventory management.

Optimal Lot Size

The most economically advantageous quantity of a product to order or produce, balancing between ordering costs and holding costs.

Economic Order Quantity

A formula used to determine the most cost-effective quantity of inventory to order, balancing the costs of ordering and holding stock.