Sheridan Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. Thefollowing information has been collected on this investment:Old EquipmentCostAccumulated depreciationRemaining lifeCurrent salvage valueSalvage value in 8 yearsAnnual cash operating costs$80,000$40,0008 years$9,800$0$35,000New EquipmentCostEstimated useful lifeSalvage value in 8 yearsAnnual cash operating costs$39,0008 years$4,400$29,000Depreciation is $10,000 per year for the old equipment. The straight-line depreciation method would be used for the new equipmentover an eight-year period with salvage value of $4,400. (b)Your answer is incorrect.Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.)Annual rate of returneTextbook and MediaSave for Later%Attempts: 2 of 3 usedSubmit Answer

The rate of return refers to the profit earned over an investment made by the investors. It is…

(b) Your answer is incorrect. Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) Annual rate of return eTextbook and Media Save for Later % Attempts: 2 of 3 used Submit Answer

(b) Your answer is incorrect. Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) Annual rate of return eTextbook and Media Save for Later % Attempts: 2 of 3 used Submit Answer

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets

Section: Chapter Questions

Problem 1AFE

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Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?
Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
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Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,640 $40.600 8 years $10,400 $0 $35,100 New Equipment Cost Estimated useful life Salvage value in 8 years Annual cash operating costs $39,000 8 years $4,600 $29.900 Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600.
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Mr. Adamson is planning to acquire a new Cold Room to replace its existing unit which they use to preserve their goods. Pertinent data are given below. for existing Cold Room: for new Cold Room: Investment P580, 000.00 P1,025, 000.00 Life 5 years remaining 12 years Salvage Value P20,600.00 P25,000.00 Variable Cost P232,000.00 P35,000.00 per year Which is profitable if money is worth 10%?
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