Use the information below to answer the following question(s).
The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125:
* = long-term assets at historical cost
-What is the current-cost depreciation in year 4 dollars?
A) $165,000
B) $200,000
C) $240,000
D) $295,000
E) $440,000

Question

Use the information below to answer the following question(s).
The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125:
  * = long-term assets at historical cost
-What is the current-cost depreciation in year 4 dollars?
A) $165,000 
B) $200,000 
C) $240,000 
D) $295,000 
E) $440,000

Quizplus · Accepted Answer

The current-cost depreciation in year 4 dollars is $165,000. This is because the current-cost depreciation is calculated by multiplying the original cost of the asset by the current cost index and then dividing by the original cost index. In this case, the original cost of the asset is $200,000, the current cost index is 1.325, and the original cost index is 1.000. Therefore, the current-cost depreciation is $200,000 * 1.325 / 1.000 = $165,000.

Use the Information Below to Answer the Following Question(s)