Business, 13.10.2020 05:01 Mintfu2580

On September 1, 2011, a company purchased a weaving machine for $239,800. The machine has an estimated useful life of 8 years and an estimated residual value of $17,800. Additionally, it is estimated that the machine would produce 740,000 bolts of woven fabric over its useful life. The company ended up selling the machine in 2018 after 1 month of use. The following budgeted and actual activity levels were provided to support your work:

Consider the above information and the below statements and select the answer choice below that shows the number of true statements. If applicable, round your intermediate calculations to 3 decimals and your final answer to the nearest $1.

1. in the year of disposal, the company will record a gain if they sell the asset for more than $17,800.
2. over the life of the asset, the company will record the same total amount of depreciation no matter if they use straight line or units-of-production.
3. the company will report more net income in 2011 under the units of production method than under straight line.
4. under US GAAP, when recording depreciation using the units-of-production method, the company should use the budgeted activity level as it will smooth the expense and avoid fluctuations in net income.

a. 0
b. 2
c. 1
d. 3
e. 4

Answers: 2

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On September 1, 2011, a company purchased a weaving machine for $239,800. The machine has an estimat...

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