A company is planning to purchase a machine that will cost $30,000, have a six year life and be...
Question:
A company is planning to purchase a machine that will cost $30,000, have a six year life and be depreciated over a have a the machine's output of 3,000 three-year period with no salvage value. The company expects to sell units evenly throughout each year. A projected Income statement for each year of the assets life appears below. What accounting rate of return for this machine?
| Sales | $120,000 | |
| Costs: | ||
| Manufacturing | $53,000 | |
| Depreciation on machine | 5,000 | |
| Selling and administrative expenses | 40,000 | (98,000) |
| Income before taxes | $22,000 | |
| Income tax (35%) | (7700) | |
| Net income | $14,300 |
Accounting Rate of Return:
The accounting rate of return is another method of measuring the profitability of a project or investment. However, this method does not take into consideration the effects of the cash flow and the time value of money.
Answer and Explanation:
Become a Study.com member to unlock this answer! Create your account
View this answerSee full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Using the Accounting Rate of Return Method to Evaluate a Budget
from
Chapter 14 / Lesson 8
2.6K
Capital budgets are used for large projects completed over long timelines and can be evaluated using the accounting rate of return (ARR) comparing the average rate of return to investments. Learn how the desired and actual ARR are calculated and guide future budget decisions.
Related to this Question
- A company is planning to purchase a machine that will cost $27,600, have a six-year life, and be depreciated over a six-year period with no salvage value. The company expects to sell the machine's out
- A company is planning to purchase a machine that will cost $30,600, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's o
- 1. A company is planning to purchase a machine that will cost $30,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine'
- A company is planning to purchase a machine that will cost $32,400, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's o
- A company is planning to purchase a machine that will cost $24,600, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's o
- A company is planning to purchase a machine that will cost $25,200, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's o
- 1) A company is planning to purchase a machine that will cost $30,600, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine'
- 1. A company is planning to purchase a machine that will cost $28,800, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine'
- A company is planning to purchase a machine that will cost $36,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's o
- A company is planning to purchase a machine that will cost $31,200, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's o
- A company is planning to purchase a machine that will cost $25,800, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A pro
- A company is planning to purchase a machine that will cost $35,400, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A pro
- A company is planning to purchase a machine that will cost $30,600, have a 6-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A proje
- A company is planning to purchase a machine that will cost $30,600, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A pro
- A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine s output of 3,000 units evenly throughout each year. A pro
- A company is planning to purchase a machine that will cost $57000 with a six-year life and no salvage value. The company expects to sell the machine output of 3,000 units evenly throughout each year.
- A company is planning to purchase a machine that will cost $24,000, have a 6-year life, and have no salvage value. The company expects to sell the machine s output of 3,000 units evenly throughout eac
- A company is planning to purchase a machine that will cost $155,000, have a seven-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine's output of 4,000 units evenly throughout each ye
- A company is planning to purchase a machine that will cost $30,600 with a six-year life and no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the as
- A company is planning to purchase a machine that will cost $90,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machi
- Ermier Company purchased a machine at a cost of $80,000. The machine is expected to have a $5,000 salvage value at the end of its 5-year useful life. Instructions: Compute annual depreciation for th
- A company is planning to purchase a machine that will cost $35,000, have a seven-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the mac
- A company with a calendar year-end, purchases a machine costing $144,000 on July 1, 2013. The machine is expected to be obsolete after three years (36 months) and, thereafter, no longer useful to the company. The estimated salvage value is $6,000. The com
- A company with a calendar year-end, purchases a machine costing $129,000 on July 1, 2016. The machine is expected to be obsolete after five years (60 months) and, thereafter, no longer useful to the company. The estimated salvage value is $6,000. The comp
- A machine costing $153,000 was purchased on May 1. The machine should be obsolete after four years and, therefore, no longer useful to the company. The estimated salvage value is $15,000. Calculate the depreciation expense for each year of its expected u
- A company with a calendar year-end purchases a machine costing $129,000 on July 1, 2016. The machine is expected to be obsolete after five years (60 months) and, thereafter, no longer useful to the company. The estimated salvage value is $6,000. The compa
- A company purchased a machine for $970,000. The machine has a useful life of 12 years and a residual value of $4,500. It is estimated that the machine could produce 1,000,000 units over its useful life. In the first year, 200,000 units were produced. In t
- A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine's life (estimated at 5 years or 20,000 hours, with a salvage value of $75,000) using each of the below-ment
- A machine with a cost of $20,000, a salvage value of $8,000, and an expected life of 15 years was purchased on September 1. For a calendar year company, the journal entry to record depreciation expense for the first year using the straight-line method wou
- A company can buy a machine for $380,000, that is expected to have a three-year life and a $30,000 salvage value. Projected annual cash flow at the end of each year are: Year 1 $240,000 Year 2 $260,000 Year 3 $280,000 Calculate Net Present Value of this m
- A machine costing $145,800 is purchased on May 1, 2013. The machine is expected to be obsolete after three years (36 months) and, thereafter, no longer useful to the company. The estimated salvage value is $5,400. Compute depreciation expense for both 20
- A machine costing $145,800 is purchased on May 1, 2013. The machine is expected to be obsolete after three years (36 months) and, thereafter, no longer useful to the company. The estimated salvage value is $5,400. Compute depreciation expense for both 201
- A company can buy a machine that is expected to have a three-year life and a $21,000 salvage value. The machine will cost $1,764,000 and is expected to produce a $191,000 after-tax net income to be received at the end of each year. If a table of present v
- A company can buy a machine that is expected to have a three-year life and a $29,000 salvage value. The machine will cost $1,796,000 and is expected to produce a $199,000 after-tax net income to be received at the end of each year. If a table of present v
- Sloman Company is considering purchasing a machine that would cost $436,800 and have a useful life of 5 years. The machine would reduce cash operating costs by $132,364 per year. The machine would have no salvage value. a. Compute the payback period for
- A company can buy a machine that is expected to have a three-year life and a $33,000 salvage value. The machine will cost $1,812,000 and is expected to produce a $203,000 after-tax net income to be re
- A company can buy a machine that is expected to have a three-year life and a $31,000 salvage value. The machine will cost $1,804,000 and is expected to produce a $201,000 after-tax net income to be re
- A company can buy a machine that is expected to have a three-year life and a $25,000 salvage value. The machine will cost $1,780,000 and is expected to produce a $195,000 after-tax net income to be re
- A company can buy a machine that is expected to have a three-year life and a $23,000 salvage value. The machine will cost $1,772,000 and is expected to produce a $193,000 after-tax net income to be re
- A company can buy a machine that is expected to have a three-year life and a $36,000 salvage value. The machine will cost $1,824,000 and is expected to produce a $206,000 after-tax net income to be re
- A company can buy a machine that is expected to have a three-year life and $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be rece
- Tray Company purchased a machine at a cost of $80,000. The machine is expected to have a $5,000 salvage value at the end of its 5-year useful life. Instructions: Compute annual depreciation for the first and second years using the: (a) Straight-line metho
- A machine was purchased for $37,000 and depreciated for five years on a straight-line basis under the assumption it would have a ten-year life and a $1,000 salvage value. At the beginning of the machine's sixth year, it was recognized the machine had thre
- A company purchased a machine on January 1, 2008, for $110,000. The machine was being depreciated using the straight-line method over an estimated useful life of 5 years, with a salvage value of $10,000. At the beginning of 2012, the company paid $35,000
- A company is considering the purchase of a machine that would cost $320,000 and would last for 7 years. At the end of 7 years, the machine would have a salvage value of $51,000. By reducing labor and other operating costs, the machine would provide annual
- Being Company has a factory machine with a book value of $90,000 and a remaining useful life of 5 years. The machine can be sold for $30,000. A new machine is available at a cost of $400,000. This machine will have a useful life of 5 years with no salvag
- A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a ne
- A firm acquires a machine for $177,600. It expects the machine to last six years. The estimated salvage value is $9,600 at the end of the machine's useful life. Calculate the depreciation charge for the 1st two years using the straight-line (time) method
- After four years, a machine had an accumulated depreciation of $38,000. The machine originally had an anticipated life of eight years and a salvage value of $5,000. If the current book value after four years is $43,000 and the machine has only two years o
- A company purchased machinery for $10,800,000 on January 1, 2011. The machinery has a useful life of 10 years and an estimated salvage value of $800,000. What is the depreciation expense on the machinery for the year ended December 31, 2012, assuming that
- A company is considering purchasing a machine that costs $320,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclus
- A company is considering purchasing a machine that costs $320,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses excl
- Gocke Company is considering purchasing a machine that would cost $478,800 and have a useful life of 5 years. The machine would reduce cash operating costs by $114,000 per year. The machine would have no salvage value. Required: A. Compute the payback per
- A firm is considering purchasing a machine that costs $57,000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $35,000 per year in labor, but it will incur $10,000 in operating and maintenanc
- A factory machine was purchased for $391,000 on January 1, 2021. It was estimated that it would have a $79,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 36,000 hours in the 5 years. The company
- A factory machine was purchased for $392,000 on January 1, 2021. It was estimated that it would have a $74,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 43000 hours in the 5 years. The company
- A machine purchased three years ago for $720,000 has a current book value using straight-line depreciation of $400,000; its operating expenses are $60,000 per year. A replacement machine would cost $480,000, have a useful life of nine years, and would req
- A machine purchased three years ago for $318,000 has a current book value using straight-line depreciation of $180,000; its operating expenses are $37,000 per year. A replacement machine would cost $239,000, have a useful life of eleven years, and would r
- A machine purchased 3 years ago for $360,000 has a current book value using straight-line depreciation of $200,000; its operating expenses are $30,000 per year. A replacement machine would cost $240,000, have a useful life of 9 years, and would require $1
- The Gage Company purchased a machine that will be depreciated by the straight-line method over its estimated 6-year life. The machine will have no salvage value. It will generate cash inflows of $7,000 each year over the next 6 years. Gage Company's requi
- A company purchased and installed a machine on January 1, 2006 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life and no salvage value. The machine was disposed of on July 1, 2010. A) Prepare
- A machine that cost $540,000 has an estimated residual value of $60,000 and an estimated useful life of six years. The company uses straight-line depreciation. Calculate its book value at the end of year 5.
- A machine that cost $550,000 has an estimated residual value of $50,000 and an estimated useful life of five years. The company uses straight-line depreciation. Calculate its book value at the end of year 4.
- A machine that cost $180,000 has an estimated residual value of $20,000 and an estimated useful life of four years. The company uses straight-line depreciation. Calculate its book value at the end of year 3.
- A machine that cost $126,500 has an estimated residual value of $5,500 and an estimated useful life of eleven years. The company uses straight-line depreciation. Calculate its book value at the end of year 9.
- A company purchased a machine for $75,000 that was expected to last 6 years and to have a salvage value of $6,000. At the beginning of the machine's fourth year, the company decided that the machine's estimated useful life should be revised to a total of
- Victory Company purchases office equipment at the beginning of the year at a cost of $15,000. The machine's useful life is estimated to be 7 years with a $1,000 salvage value. The book value at the end of 7 years is: \\ A. 2143 B. 1000 C. 2000 D. 14,0
- A machine with a cost of $15,000, a salvage value of $6,000 and an expected life of 20 years was purchased on September 1. For a calendar year company, the journal entry to record depreciation expense for the first year would be to: A. debit Depreciation
- The management of Kunkel Company is considering the purchase of a $30,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of retu
- The management of Kunkel Company is considering the purchase of a $34,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of retu
- U Company purchased a new piece of manufacturing machinery on January 2, 2016. The machine had a total cost of $270,000 and an estimated salvage value of $30,000. Its useful life is estimated to be 6 years; over its life, it should produce 1,000,000 units
- A firm purchased computer-aided drafting and machining equipment at the beginning of the year for $420,000. The machine has an expected useful life of 6 years and a $38,000 residual value. Calculate the annual depreciation expense for the first four years
- A firm purchased computer-aided drafting and machining equipment at the beginning of the year for $420,000. The machine has an expected useful life of six years and a $38,000 residual value. Calculate the annual depreciation expense for the first four yea
- A three-year-old machine has a cost of $19,100, an estimated residual value of $2.600, and an estimated useful life of 33.000 machine hours. The company uses units-of-production depreciation and ran t
- A machine that costs $720,000 has an estimated residual value of $60,000 and an estimated useful life of eleven years. The company uses straight-line depreciation. Calculate its book value at the end of year 10.
- A company paid $200,000 eight years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $20,000 per year. The company is considering using this machine in a new project that will have incremental revenues of $35
- A machine that costs $770,000 has an estimated residual value of $70,000 and an estimated useful life of 7 years. The company uses straight-line depreciation. Calculate its book value at the end of year 6.
- A small manufacturing firm has just purchased a machine for $48,000. The shop manager estimates the machine has a useful life of 5 years and no salvage value. Compute the depreciation schedule using:
- A company's old machine that cost $47,000 and had accumulated depreciation of $36,300 was traded in on a new machine having an estimated 20-year life with an invoice price of $57,700. The company also paid $49,300 cash, along with its old machine to acqui
- A company's old machine that cost $40,000 and had accumulated depreciation of $22,000 was traded in on a new machine having an estimated 20-year life with an invoice price of $45,000. The company also paid $33,000 cash, along with its old machine to acqui
- A company's old machine that cost $56,000 and had accumulated depreciation of $44,400 was traded in on a new machine having an estimated 20-year life with an invoice price of $67,600. The company also paid $57,400 cash, along with its old machine to acqui
- A machine purchased three years ago for $302,000 has a current book value using straight-line depreciation of $189,000; it's operating expenses are $37,000 per year. A replacement machine would cost $
- A machine purchased three years ago for $309,000 has a current book value using straight-line depreciation of $181,000: its operating expenses are $34,000 per year. A replacement machine would cost $2
- 1. A machine purchased three years ago for $314,000 has a current book value using straight-line depreciation of $181,000; its operating expenses are $38,000 per year. A replacement machine would cost
- On January 1, 20X1, your company, which uses the straight-line method, purchases 3 machines, recorded as follows: Cost ($) Salvage Value ($) Useful Life Machine No. 1 6,000 1,000 5 years Machine No. 2 6,000 1,000 10 years Machine No. 3 11,000 1,000 10 yea
- A company's old machine, which cost $30,000 and had accumulated depreciation of $21,000, was traded in on a new machine of like purpose having an estimated 20-year life with an invoice price of $40,000. The company also paid $33,000 cash, along with its o
- Calculate the book value of a 3-year-old machine that has a cost of $21,000, has an estimated residual value of $1,000, and has an estimated useful life of 40,000 machine hours. The company uses units-of-production depreciation and ran the machine 3,200 h
- Tangen Corporation is considering the purchase of a machine that would cost $380,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $80,000. By reducing l
- Calculate the book value of a two-year-old machine that costs $200,000, has an estimated residual value of $40,000, and has an estimated useful life of 20,000 machine hours. The company uses units-of-production depreciation and ran the machine 3,000 hours
- A corporation sells a machine used for 9 years in its business for $22,000. The machine originally cost $120,000 and was fully depreciated. It gains will be treated as?
- Tangen Corporation is considering the purchase of a machine that would cost $394,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $87,000. By reducing labor and other operating costs, the machine would provi
- ABC Company purchases a machine for $100,000. It has an estimated salvage value of $10,000 and a useful life of five years. What is the first-year depreciation expense for this machine if the company uses the sum-of-the-years'-digits method? a. 20,000 b.
- Calculate the depreciation expense for each machine in year 1 and year 2 for the year ended December 31. Machine 1: cost = $82,000, salvage value = $8,000, purchase date = January 1, estimated life = 4 years, depreciation method = straight line Machine 2:
- A machine is purchased for $130,649. The machine is classified as a MACRS 7-year property. Its useful life is 12 years. The estimated salvage value at the end of 12 years is $18,076. Using straight-line depreciation, what is the depreciation in year 7?
- Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produce
- On January 1, 20X1, your company purchased for $550,000 a machine with an estimated useful life of 10 years and a salvage value of $50,000. Using SYD depreciation, the 20X2 depreciation expense is: a. $18,182 b. $200,000 c. $90,000 d. $81,818
- On January 1, 20X1, your company purchased for $550,000 a machine with an estimated useful life of 10 years and a salvage value of $50,000. Using SYD depreciation, the 20X2 depreciation expense is: a. $81,818 b. $90,000 c. $18,182 d. $200,000
- A company purchased a machine on January 1 of the current year for $750,000. Calculate the annual depreciation expense for each year of the machine s life (estimated at 5 years or 20,000 hours, with a
- Sandhill Co. bought a machine on January 1, 2017. The machine cost $178,000 and had an expected salvage value of $30,000. The life of the machine was estimated to be 4 years. The company uses the straight-line method of depreciation. The book value of the
- The management of Kunkel Company is considering the purchase of a $21,000 machine that would reduce operating costs by $5,000 per year. At the end of the machine's five-year useful life, it will have zero scrap value. The company's required rate of return
Explore our homework questions and answers library
Browse
by subject