A Company Used Straight-Line Depreciation for an Item of Equipment

question 114

Multiple Choice

A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000,and had a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 and its total useful life was increased from 5 years to 6 years.Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life:

• A)$1,000.
• B)$1,800.
• C)$1,467.
• D)$1,600.
• E)$2,160.

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Definitions:

Principle of Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize risks.

Efficient Market

A financial market theory stating prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Concentrating Investment

Allocating a significant portion of an investment portfolio to a single investment or a small group of investments, increasing potential risk and return.

Systematic Risk Principle

The concept that the overall market or economy has inherent risks that affect all investments to some degree, and these risks cannot be eliminated through diversification.