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jok3333 [9.3K]
3 years ago
7

Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses: Cash Cash Reven

ues Expenses Year 1 $ 8,000 $ 8,000 Year 2 $12,000 $ 8,000 Year 3 $15,000 $ 9,000 Year 4 $20,000 $10,000 Year 5 $20,000 $10,000 Depreciation will be $4,000 per year. What is the accounting rate of return on the investment
Business
1 answer:
Lady bird [3.3K]3 years ago
6 0

Answer:

Accounting rate of return= 20%

Explanation:

<em>The accounting rate of return is the average annual income expressed as a percentage of the average investment.  </em>

<em>The simple rate of return can be calculated using the two formula below:  </em>

Accounting rate of return  

= Annual operating income/Average investment × 100  

Average investment = (Initial cost + scrap value)/2  

Average profit = Total profit over investment period / Number of years

Total revenue = 8000+12000+ 15000 + 20,000+ 20,000 = 75000

Total expenses= 8000 + 8000 + 9000 +10,000 + 10,000 = 45000

Cash profit = 75,000 - 45,000 = 30,000

Depreciation = 4000× 5 = 20,000

Accounting profit = Cash profit - Depreciation = 30,000- 20,000 = 10,000

Average profit = 10,000/5 = 2,000

Accounting rate of return = 2,000/20000× 100 = 20%

Accounting rate of return= 20%

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3 years ago
Amy, a single individual and sole shareholder of Brown Corporation, sold all of the Brown stock for $30,000. The stock basis was
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Answer:

A) a $50,000 ordinary loss and $70,000 LTCL

Explanation:

given data

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stock basis = $150,000

time = 3 year

solution

we know that here stock is Section 1244 stock and original owner is Amy

so

first loss is for single individuals is = $50000

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total loss realized = $120000

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Answer:

Please see attachment

Explanation:

Please see attachment

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