An investment of P270,119 cis needed for a Korean Mart that will produce a uniform annual revenue.This Korean Mart is operating daily (assuming 30 days a month) for 5 years and then have a salvage value of 10% of the investment. Out-of-pocket costs for operation and maintenance will be P81,014 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Using rate or return method, how much should be their minimum daily revenue for this investment to be disirable (break-even)?
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.
An investment of P270,119 cis needed for a Korean Mart that will produce a uniform annual revenue.This Korean Mart is operating daily (assuming 30 days a month) for 5 years and then have a salvage value of 10% of the investment. Out-of-pocket costs for operation and maintenance will be P81,014 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Using rate or return method, how much should be their minimum daily revenue for this investment to be disirable (break-even)?
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