ABC Co. purchased a fixed asset for $100,000, with a useful life of five years, residual value of $9,000, and an expected total net income of $21,600 for 5 years. What is the amount of the average investment? Average investment Initial cost + salvage value/2 $9000 B) $100,000 Ⓒ$54,500 $37,500

ABC Co. purchased a fixed asset for $100,000, with a useful life of five years, residual value of $9,000, and an expected total net income of $21,600 for 5 years. What is the amount of the average investment? Average investment Initial cost + salvage value/2 $9000 B) $100,000 Ⓒ$54,500 $37,500

Name: ABC Co. purchased a fixed asset for $100,000, with a useful life of f
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Description: ABC Co. purchased a fixed asset for $100,000, with a useful life of five years, residual value of $9,000, and an expected total netincome of $21,600 for 5 years. What is the amount of the average investment?Average investment Initial cost + salvage

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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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Question

ABC Co. purchased a fixed asset for $100,000, with a useful life of five years, residual value of $9,000, and an expected total net
income of $21,600 for 5 years. What is the amount of the average investment?
Average investment Initial cost + salvage value / 2
=
A) $9000
B) $100,000
$54,500
$37,500

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