3.2.1 - Ownership Cost
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Practice Questions
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Define ownership cost.
💡 Hint: Think about costs that are constant regardless of how much you use the equipment.
What is included in the initial cost of equipment?
💡 Hint: Consider all expenses related to acquiring the equipment.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What are ownership costs?
💡 Hint: Think about costs that do not vary with operation.
True or False: Operating costs are incurred whether the equipment is used or not.
💡 Hint: Consider when costs are incurred.
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Challenge Problems
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A construction company purchases a backhoe for $120,000, with an expected salvage value of $15,000 and a useful life of 7 years. Calculate the annual depreciation using the straight-line method and discuss how this affects the overall project budgeting.
💡 Hint: Use the straight-line formula you learned.
Explain the financial implications of choosing an accelerated depreciation method versus a straight-line method for a newly acquired piece of equipment worth $75,000 with a salvage value of $5,000 over a useful life of 10 years.
💡 Hint: Compare the benefits and drawbacks of each method in financial reporting.
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