B Company Switched from the Sum-Of-The-Years-Digits Depreciation Method to Straight-Line

question 80

Multiple Choice

B Company switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2013. The change affects machinery purchased at the beginning of 2011 at a cost of $72,000. The machinery has an estimated life of five years and an estimated residual value of $3,600. What is B's 2013 depreciation expense?

• A)$9,120.
• B)$13,680.
• C)$15,840.
• D)$19,200.

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Definitions:

Operating Income

Operating income is the profit earned from a firm's normal business operations, excluding non-operating income and expenses like interest and taxes.

Cash Payback Period

The duration it takes for an investment to generate cash flows sufficient to recover the initial investment cost, often used in capital budgeting to assess investment attractiveness.

Payback Period

The length of time required to recover the cost of an investment or project.

Factory Overhead

Factory Overhead includes all indirect costs associated with manufacturing, such as electricity for the factory, maintenance, and salary of the maintenance staff.