On the First Day of the Year Mayo Resources Purchased

question 7

Multiple Choice

On the first day of the year Mayo Resources purchased a forklift truck for $12 000 which is to be depreciated by 25% a year. At the end of the first year:

• A) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $12 000.
• B) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $15 000.
• C) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $9000.
• D) depreciation in the income statement is $0 and the carrying value of the forklift in the balance sheet is $12 000.

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Definitions:

Enforcement

The act of ensuring compliance with laws, regulations, or agreements through legal means or actions.

Primary Obligation

A fundamental or main duty that a party is required to perform under the terms of a contract.

Indemnity

Indemnity is a contractual obligation of one party to compensate the loss occurred to the other party due to the acts of the indemnitor or any other party.

Guarantor

A guarantor is a person or entity that agrees to be responsible for another's debt or obligations, should the original party fail to meet their responsibilities.