770 000 $ investment was made 7 years ago for a construction equipment. Annual revenue from the use of this machine is $140 000. A maintenance-repair expense of $3,000 was made for the first year, and $500 for each subsequent year, in addition to the previous year. The company plans to sell the construction equipment at the end of the year (9th year) after 2 years with a scrap value of 135,000 USD. Calculate the cash flow from 1 year ago. A) 146 500 B) 140 000 C) 133 500 D) 134 500 E) 135 000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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770 000 $ investment was made 7 years ago for a construction equipment. Annual revenue from the use of this machine is $140 000. A maintenance-repair expense of $3,000 was made for the first year, and $500 for each subsequent year, in addition to the previous year. The company plans to sell the construction equipment at the end of the year (9th year) after 2 years with a scrap value of 135,000 USD. Calculate the cash flow from 1 year ago.
A) 146 500
B) 140 000
C) 133 500
D) 134 500
E) 135 000
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