Operating Expenses Zorex Corporation recently sold one of its new BlunderBuss VII copy machines to Uptown Copy Center, Inc., and a second unit to Suburban Forms 4U. Uptown Copy is a high-volume operation located in the heart of the financial district; Suburban Forms is located in a small shopping center in a new residential area and does a great deal of custom work involving small, specialized jobs. The machines sold to the two companies are identical, and both companies paid the same purchase price of $18,500. Under generally accepted accounting principles, both of the copy centers must recognize as an expense each year an appropriate portion of the purchase price of their copy machines. You have an opportunity to compare the income statements of the two enterprises and note that the annual reported expense related to the original purchase price of the copy machines differs between the two companies.

The disclosure of accounting information is critical when outside parties attempt to evaluate and compare different enterprises. Keeping in mind the use of accounting information to evaluate and compare the two copy enterprises, answer the following questions:

a. What information about the BlunderBuss VII copy machines and the amounts reported as expense each period would you need to know to make an intelligent evaluation of the operation of the two copy centers? Indicate why you think the information would be important.

b. Which basic concept or concepts of accounting do you think are most important in determining the amount of the copy machine’s original purchase price to report as expense each year? Explain.

c. Why might the two copy centers report different amounts annually as depreciation expense?