ABC Company wants to purchase a new line of machinery. Two (2) models are available, one (1) has a slightly higher capacity than the other. The costs and expected benefits are as follows: Machine X Machine Y Acquisition cost 80,000.00 150,000.00 Estimated useful life 5 Profit before depreciation Year 1 50,000.00 50,000.00 Year 2 50,000.00 50,000.00 Year 3 30,000.00 60,000.00 Year 4 20,000.00 60,000.00 Year 5 10,000.00 60,000.00 Required: Using Accounting Rate of Return, which equipment should be selected by ABC Company? Show your solution.

ABC Company wants to purchase a new line of machinery. Two (2) models are available, one (1) has a slightly higher capacity than the other. The costs and expected benefits are as follows: Machine X Machine Y Acquisition cost 80,000.00 150,000.00 Estimated useful life 5 Profit before depreciation Year 1 50,000.00 50,000.00 Year 2 50,000.00 50,000.00 Year 3 30,000.00 60,000.00 Year 4 20,000.00 60,000.00 Year 5 10,000.00 60,000.00 Required: Using Accounting Rate of Return, which equipment should be selected by ABC Company? Show your solution.

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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