1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
raketka [301]
3 years ago
15

A machine can be purchased for $202,000 and used for five years, yielding the following net incomes. In projecting net incomes,

double-declining depreciation is applied, using a five-year life and a zero salvage value.
Year 1 Year 2 Year 3 Year 4 Year 5
Net incomes $18,000 $25,000 $53,000 $58,000 $108,000
Compute the machine’s payback period (ignore taxes).

Business
2 answers:
kolbaska11 [484]3 years ago
7 0

Answer:

the machine’s payback period is 2 years and 3 months.

Explanation:

First remove the depreciation expense from the net income because this is a non-cash item.

Depreciation Expense (double-declining method) = 2 × SLDP × BVSLDP

SLDP = 100 ÷ Number of useful life

         = 100 ÷ 5

         = 20 %

Year 1

Depreciation Expense = 2 × 20% × $202,000

                                     = $80,800

Year 2

Depreciation Expense = 2 × 20% × ($202,000 - $80,800)

                                     = $48,480

Year 3

Depreciation Expense = 2 × 20% × ($202,000 - $48,480)

                                     = $61,408

Year 4

Depreciation Expense = 2 × 20% × ($202,000 - $61,408)

                                     = $56,237

Year 5

Depreciation Expense = 2 × 20% × ($202,000 - $56,237)

                                     = $58,305

Summary of Cash flows will be :

Year 1 = $18,000 + $80,800 = $98,800

Year 2 = $25,000 + $48,480 = $72,480

Year 3 = $53,000 + $61,408 = $114,408

Year 4 = $58,000 + $56,237 = $114,237

Year 5 = $108,000 + $58,305 = $166,305

Payback period :

$202,000 = Year 1 ($98,800) + Year 2 ($72,480) + $30,720 / $114,408

                 = 2 years and 3 months

FinnZ [79.3K]3 years ago
3 0

Answer:

2.36 years

Explanation:

Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows.

To derive cash flows from net income, depreciation expenses should be added to net income.

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life) = 2 / 5 = 0.4

Deprecation expense in year 1 = 0.4 x $202,000 = $80,800

Book value in year 2 = $202,000 - $80,800 = $121,200

Deprecation expense in year 2 = 0.4 x $121,200 = $48,480

Book value in year 3 = $121,200 - $48,480 = $72,720

Deprecation expense in year 3 = 0.4 x $72,720 = $29,088

Book value in year 4 = $72,720 - $29,088 = $43,632

Deprecation expense in year 4 = $43,632 x 0.4 = $17,452.80

Book value in year 5 = $43,632 x 0.4 - $17,452.80 = $26,179.20

Deprecation expense in year 5 = $26,179.20 x 0.4 = $10,471.68

Cash flow in year 1 = $18,000 +  $80,800 = $98,800

Cash flow in year 2 = $25,000 + $48,480 = $73,480

Cash flow in year 3 = $53,000  + $29,088 = $82,088

Cash flow in year 4 = $58,000  + $17,452.80 = $75,452.80

Cash flow in year 5 = $108,000 + $10,471.68 = $118,471.68

Please check the attached image for how the payback period was calculated

You might be interested in
Lore Co. changed from the cash basis to the accrual basis of accounting during 2005. The cumulative effect of this change should
marysya [2.9K]

Answer: Prior period adjustment resulting from the correction of an error.

Explanation:

The Cash basis method is not acceptable under both IFRS and U.S. GAAP accounting principles and these are the principles followed by the majority of the world so Lore Co. was using the cash basis in violation of both conventions which means that their accounting records before the change are considered wrong and full of errors.

In changing to the acceptable principles, they are correcting that error and need to adjust prior periods for that error as well.

8 0
2 years ago
Goods that are created and used domestically are __________.
dem82 [27]
The answer is C. Produced and consumed in one country. 
Goods that are created and used domestically are not imported goods because imported goods means coming from other country, it's not also exported goods since it is not exported to other county. Rather it is being produced and used of the same country.
7 0
3 years ago
Read 2 more answers
Craig's collected $15,000 from customers for games played in july. craig's sold bowling merchandise inventory from its pro shop
tekilochka [14]

Answer:

cash 15,000 debit

  account receivables 15,000 credit

cash  3,000 debit

A/R    5,000 debit

  service revenue 8,000 credit

COGS  6,800 debit

   Merchandise   6,800 credit

Cash  4,000 debit

 A/R               4,000 credit

Cash   2,500 debit

  *unearned revenue   2,500 credit

**utilties payable   800 debit

       cash                   800 credit

salaries expense 3,500 debit

      cash                      3,500 debit

***prepaid expene        375  debit

prepaid insurance   1,125  debit

     cash                             1,500 credit

repairs expense      700 debit

      cash                           700 credit

utilities expense      900 debit

   utilities payable            900 credit

Explanation:

We will record following the debit = credit rule

* It will be considered unearned revenue as we didn'0t perform the services we have the obligation to do so therefore, it is a liability.

**as the expense was recorded previously a payable was created to recognize the obligation to pay our utilities. Therefore, we write-off the payable

*** 1,500 is the full contract value for 4 months:

1,500 / 4 = 375 per month

one most is declared as expense and the remainder as prepaid.

7 0
3 years ago
Leiff goes online to buy a new video game. He finds a site that currently has a promotion of 15% off on all orders over $50. Lei
rjkz [21]

Answer:

......................

Explanation:

4 0
3 years ago
Read 2 more answers
On April 30, Gomez Services had an Accounts Receivable balance of $24,600. During the month of May, total credits to Accounts Re
Nataliya [291]

Answer: $53,600

Explanation:

Credit sales increase the balance on Accounts Receivables because they represent that people owe the business.

It is therefore included in the formula for calculating the ending balance of Accounts Receivables:

Ending accounts receivables = Beginning accounts receivable + Credit sales in May - Customer payments during May

19,000 = 24,600 + Credit Sales in May - 59,200

Credit Sales in May = 19,000 + 59,200 - 24,600

= $53,600

4 0
2 years ago
Other questions:
  • By what percentage did​ mydeco's revenues grow each year from 2010 to​ 2013?b. by what percentage did net income grow each​ year
    13·1 answer
  • Which of the following circumstances is (are) not an acceptance of the goods by the buyer
    12·1 answer
  • Corner Jewelers, Inc. recently analyzed the project whose cash flows are shown below. However, before the company decided to acc
    8·1 answer
  • Pharoah Company had the following two transactions related to its delivery truck. 1. Paid $280 for an oil change. 2. Paid $600 t
    7·1 answer
  • A country finds itself in the following situation: the government budget surplus is 2% of its GDP; private savings is 30% of GDP
    15·1 answer
  • Banks sometimes quote interest rates in the form of "add-on interest." In this case, if a 1-year loan is quoted with a 20% inter
    10·1 answer
  • A home improvement store has an assembled kids playset on display. There
    9·2 answers
  • Erica transfers land worth $500,000, basis of $100,000, to a newly formed corporation, Robin Corporation, for all of Robin's sto
    15·1 answer
  • Janet and James purchased their personal residence 15 years ago for $300,000. For the current year, they have an $80,000 first m
    10·1 answer
  • TVs and VCRs are:<br><br> A. needs<br> B. wants<br> C. resources<br> D. markets
    8·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!