Lundholm Company Purchased a Machine for $100,000 on January 1

question 37

Multiple Choice

Lundholm Company purchased a machine for $100,000 on January 1, 2011. Lundholm depreciates machines of this type by the straight-line method over a 10-year period using no salvage value. Due to a change in sales patterns, on January 1, 2013, management determines the useful life of the machine to be a total of five years. What amount should Lundholm record for depreciation expense for 2013? The tax rate is 40%.

• A)$20,000.
• B)$16,000.
• C)$17,778.
• D)$26,667.

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Definitions:

Foreign Subsidiary

A company owned or controlled by another company, the parent company, that is based in a different country than the subsidiary.

Functional Currency

The functional currency is the main currency used by a business or economic entity, reflecting the primary economic environment in which it operates.

Opening Inventory

The value of the goods available for sale at the beginning of an accounting period.

Functional Currency

The currency of the primary economic environment in which an entity operates, usually determined by the currency that mainly influences sales prices for goods and services or the country whose competitive forces and regulations most affect the entity's performance.