Answer: Depreciation expense reflects the decrease in market value each year.
Explanation:
Depreciation is the decrease in the value of an asset due to the passage of time. Overtime, the value of machineries reduce as a result of usage. Depreciation is therefore the reduction in the value of assets. Depreciation is also the method used tin reallocating the cost of a tangible assets over its useful life span. Firms depreciate assets for accounting and tax purposes. The reduction in the value of an asset has am effect on the balance sheet of an entity.
The answer to the question is the second option. Depreciation does not have anything to do with the market value. Other options are correct except for the second option which states that depreciation expense reflects the decrease in market value each year.
<u>Solution:</u>
The price per variable unit is set at 1.5 times the cost; the VC / unit is estimated at $2.50.
Price = 2.5 * 2.50 = $6.25
Variable cost = $2.50
Fixed cost = $220,000
Break-Even Volume = Fixed cost / (Price - Variable cost)
= $220.000 / (6.25 - 2.50)
Break-Even Volume = 58,667 units
Answer:
Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for its top executives. On January 1, 2021, 20 million options were granted, each giving the executive owning them the right to acquire five $1 par common shares. The exercise price is the market price on the grant date—$10 per share. Options vest on January 1, 2025. They cannot be exercised before that date and will expire on December 31, 2027. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignore income tax.
Assume that all compensation expense from the stock options granted by Wilson already has been recorded. Further assume that 200,000 options expire in 2014 without being exercised. The journal entry to record this would include
