Mobic Inc Acquired Some Manufacturing Equipment in January 2010 for $400,000

Multiple Choice

Mobic Inc. acquired some manufacturing equipment in January 2010 for $400,000 and depreciated it $40,000 each year for three years on a straight-line basis. During 2013, the manufacturer announced a new technology for this type of equipment that will make the old models obsolete by the end of 2016. As a result, Mobic will plan to replace the equipment at that time, effectively reducing the asset's life from ten to seven years. In its financial statements for 2013, Mobic should:

A) Charge $280,000 in depreciation expense.
B) Report the book value of the equipment in its12/31/2013 balance sheet at $210,000.
C) Make an adjustment to retained earnings for the error in measuring depreciation during 2010-2012.
D) None of the above is correct.