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26 September, 04:41

Wizard Co. purchased two machines for $250,000 each on January 2, 2005.

The machines were put into use immediately. Machine A has a useful life of 5 years and can only be used in one research project. Machine B will be used for 2 years on a research and development project and then used by the production division for an additional 8 years. Wizard uses the straight-line method of depreciation. What amount should Wizard include in 2005 research and development expense?

A. $75,000

B. $275,000

C. $375,000

D. $500,000

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Answers (1)
  1. 26 September, 05:57
    0
    B. $275,000

    Explanation:

    The second machine will be depreciate over time as it can later be used for operational purposes or another research projects. The first, as can only be used for a research project It should be considered expenses for the entire amount regardless of the useful life.

    Machine B useful life 10 years

    depreciation expense: cost / useful life

    250,000 / 10 = 25,000

    machine A 250,000 + 25,000 depreciation for machine B = 275,000 total
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Home » Business » Wizard Co. purchased two machines for $250,000 each on January 2, 2005. The machines were put into use immediately. Machine A has a useful life of 5 years and can only be used in one research project.
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