The Emerson Electronics Company just purchased a soldering machine to be used in its assemblycell for flexible disk drives. The soldering machinecost $350,000. Because of the specialized function itperforms, its useful life is estimated to be five years.It is also estimated that at that time its salvage valuewill be $60,000. What is the capital recovery costfor this investment if the firm’s interest rate is 15%?
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.
The Emerson Electronics Company just purchased a soldering machine to be used in its assembly
cell for flexible disk drives. The soldering machine
cost $350,000. Because of the specialized function it
performs, its useful life is estimated to be five years.
It is also estimated that at that time its salvage value
will be $60,000. What is the capital recovery cost
for this investment if the firm’s interest rate is 15%?
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