Gulf Consulting Co

question 143

Multiple Choice

Gulf Consulting Co. reported the following on its December 31, 2013, balance sheet: Equipment (at cost) …..$700,000
In a disclosure note, Gulf indicates that it uses straight-line depreciation over five years and estimates salvage value as 10% of cost. Gulf's equipment averages 3.5 years at December 31, 2013. What is the book value of Gulf's equipment at December 31, 2013?

• A)$490,000.
• B)$441,000.
• C)$259,000.
• D)$210,000.

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Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Initial Outlay

The upfront expenditure required to start a project, such as purchasing equipment or inventory, crucial for budgeting and financial planning.

Incremental Cash Flows

The additional cash flow a new project generates for an organization, which is critical for assessing its viability and profitability.

Opportunity Costs

The price paid for not selecting the next most favorable choice when a decision is made.