Complete this question by
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![es
Required information
[The following information applies to the questions displayed below.]
Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its
amusement houses. The games would cost a total of $385,000, have a fifteen-year useful life, and have a
total salvage value of $38,500. The company estimates that annual revenues and expenses associated
with the games would be as follows:
Revenues
Less operating expenses:
Commissions to amusement houses
Insurance
Depreciation
Maintenance
Net operating income
$ 80,000
53,000
23,100
70,000
$ 280,000
Complete this question by entering your answers in the tabs below.
226, 100
$ 53,900
2a. Compute the simple rate of return promised by the games.
2b. If the company requires a simple rate of return of at least 12%, will the games be purchased?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe757141d-3d88-4877-a76a-5917ced4d0f0%2F1bf1617b-da66-473b-b0c6-8f04ec57fb9c%2Fcno1hg5r_processed.jpeg&w=3840&q=75)
Transcribed Image Text:es
Required information
[The following information applies to the questions displayed below.]
Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its
amusement houses. The games would cost a total of $385,000, have a fifteen-year useful life, and have a
total salvage value of $38,500. The company estimates that annual revenues and expenses associated
with the games would be as follows:
Revenues
Less operating expenses:
Commissions to amusement houses
Insurance
Depreciation
Maintenance
Net operating income
$ 80,000
53,000
23,100
70,000
$ 280,000
Complete this question by entering your answers in the tabs below.
226, 100
$ 53,900
2a. Compute the simple rate of return promised by the games.
2b. If the company requires a simple rate of return of at least 12%, will the games be purchased?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education