Reference: 14-01
Financial Statements for Larned Company Appear Below:
Larned

Reference: 14-01
Financial statements for Larned Company appear below:
Larned Company
Balance Sheet
December 31, 20X6 and 20X5 (dollars in thousands) $$\begin{array} { | c | l | l | } \hline & 20 X 6 & 20 \times 5 \\\hline \text { Current assets: } & & \\\hline \text { Cash and marketable securities } & \$ 130 & \$ 100 \\\hline \text { Accounts receivable, net } & 150 & 130 \\\hline \text { Inventory } & 100 & 100 \\\hline \text { Prepaid expenses } & 20 & 20 \\\hline \text { Total current assets } & 400 & 350 \\\hline \text { Noncurrent assets: } & & \\\hline \text { Plant \& equipment, net } &{ 1,640 } & 1,600 \\\hline \text { Total assets } & \underline { \$ 2,040 } & \underline { \$ 1,950 } \\\hline & & \\\hline \text { Current liabilities: } & & \\\hline \text { Accounts payable } & \$ 290 & \$ 280 \\\hline \text { Accrued liabilities } & \underline { 110 } & 80 \\\hline \text { Total current liabilities } & 400 & 360 \\\hline \text { Stockholders' equity: } & & \\\hline \text { Preferred stock, \$20 par, 10\% } & 120 & 120 \\\hline \text { Common stock, \$10 par } & 660 & 690 \\\hline \text { Retained earnings } & 860 & 780 \\\hline \text { Total stockholders' equity } & { 1,640 }& { 1,590 } \\\hline \text { Total liabilities \& stockholders' equity } & \underline { \$ 2,040 } & \underline { \$ 1,950 } \\\hline\end{array}$$ Larned Company
Income Statement
For the Year Ended December 31, 20X6 (dollars in thousands) $$\begin{array} { | l | r | } \hline \text { Sales (all on account) } & \$ 2,930 \\\hline \text { Cost of goods sold } & 2,050 \\\hline \text { Gross margin } & 880 \\\hline \text { Operating expenses } & 350 \\\hline \text { Net operating income } & 530 \\\hline \text { Interest expense } & 40 \\\hline \text { Net income before taxes } & 490 \\\hline \text { Income taxes (30\%) } & 147 \\\hline \text { Net income } & \$ 343 \\\hline\end{array}$$ Dividends during 20X6 totalled $263 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, 20X6 was $160.
Included in operating expenses was depreciation expense of $20,000. No non-current assets were sold.
-The non-current asset section of a business's balance sheet is below. $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { End of } \\\text { Current } \\\text { Year }\end{array} & \begin{array} { l } \text { End of } \\\text { Prior Year }\end{array} \\\hline \text { Equipment } & \$ 50,000 & \$ 60,000 \\\hline \text { Less accumulated depreciation } & \underline { 41,000 } & \underline { 40,000 } \\\hline & \underline { \underline { \$ 9,000 } } & \underline { \underline { \$ 20,000 } } \\\hline\end{array}$$ These were the only depreciable assets owned by the business. During the current year the business sold equipment which it had purchased five years previously at a cost of $10,000. The accumulated depreciation on the equipment sold was $8,000 and the cash received from the sale was $3,000. There were no additions of equipment during the year. What was the depreciation expense recorded during the current year?

A) $9,000
B) $1,000
C) $8,000
D) Cannot be determined with the information provided