Provide answer in table format B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $384,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 153,600 units of the equipment’s product each year. The expected annual income related to this equipment follows. Sales $ 240,000 Costs Materials, labor, and overhead (except depreciation on new equipment) 128,000 Depreciation on new equipment 32,000 Selling and administrative expenses 24,000 Total costs and expenses 184,000 Pretax income 56,000 Income taxes (20%) 11,200 Net income $ 44,800 1. Compute the payback period. 2. Compute the accounting rate of return for this equipment.
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.
Provide answer in table format
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $384,000 with a 12-year life and no salvage value. It will be
| Sales | $ | 240,000 | |
| Costs | |||
| Materials, labor, and overhead (except depreciation on new equipment) | 128,000 | ||
| Depreciation on new equipment | 32,000 | ||
| Selling and administrative expenses | 24,000 | ||
| Total costs and expenses | 184,000 | ||
| Pretax income | 56,000 | ||
| Income taxes (20%) | 11,200 | ||
| Net income | $ | 44,800 | |
1. Compute the payback period.
2. Compute the accounting
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