When a Capital Asset with a 5-Year Estimated Useful Life

question 7

Multiple Choice

When a capital asset with a 5-year estimated useful life is sold during the second year, how would the use of the SYD method of amortization, instead of the straight-line method, affect the gain or loss on the sale? $\begin{array}{|l|l|l|}\hline &\text { Gain } & \text { Loss } \\\hline1& \text { No effect } & \text { No effect } \\\hline 2&\text { Increase } & \text { Increase } \\\hline 3&\text { Decrease } & \text { ncrease } \\\hline4& \text { nncrease } & \text { Decrease } \\\hline\end{array}$

• A) Choice 1
• B) Choice 2
• C) Choice 3
• D) Choice 4

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Definitions:

Optimal Short-Run Output

The level of production that maximizes a firm's short-term profits or minimizes its losses, given its fixed costs.

All-Natural Ice Cream

Ice cream made only with natural ingredients, without artificial flavors, colors, or preservatives.

Market Price

The contemporary market value at which a service or asset is accessible for sale or purchase.

Perfect Competition

A market structure characterized by a large number of small firms, homogeneous products, and free entry and exit, making firms price takers.