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## Jason corporation has invested in a machine that cost \$75,000, that has a useful life of fifteen years, and that has no salvage value at the end of its useful life. the machine is being depreciated by the straight-line method, based on its useful life. it will have a payback period of six years. given these data, the simple rate of return on the machine is closest to: (ignore income taxes in this problem.)

We can solve
this problem by first calculating the annual net cash inflow. This can be
solved by remembering that:

Payback period
= Initial investment / Annual net
cash inflow

6 years = \$75,000
/ Annual net
cash inflow

Therefore,
Annual net
cash inflow = \$12,500

Next, we
calculate for the cost. The cost we will consider here is the depreciation
value of the machine.
Annual depreciation
= \$75,000 / 15 years = \$5,000

Therefore the annual net operating income is:
Annual net operating income = \$12,500 – \$5,000 = \$7,500

Simple rate of
return is calculated by:
Simple rate of
return = Annual net operating income / Initial
investment
Simple rate of
return = \$7,500 /
\$75,000 = 0.1 = 10%

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## Down under boomerang, inc., is considering a new three-year expansion project that requires an initial fixed asset investment of \$2.64 million. the fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. the project is estimated to generate \$2,060,000 in annual sales, with costs of \$755,000. the tax rate is 35 percent and the required return on the project is 13 percent. what is the project’s npv?

To answer this problem, 1st let us calculate
the total annual cash flow.

We define the given variables:

Annual Income = \$2,060,000

Annual Cost = \$755,000

Annual Profit = \$2,060,000 – \$755,000 = \$1,305,000

Annual Tax = \$1,305,000 * 0.35 = \$456,750

Depreciation = \$2.64 million / 3 = \$880,000

Savings from Depreciation = \$880,000 * 0.35 = \$308,000

Therefore,

Annual Cash Flow = Annual Profit + Savings from
Depreciation

Annual Cash Flow = \$1,305,000 + \$308,000

Annual Cash Flow = \$1,613,000

The present value of annuity is:

P = A [1 – (1 + i)^-n ] / i

P = \$1,613,000 [1 – (1 + 0.13)^(-3)] / 0.13

P =
\$3,808,539.14 = NPV

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## Equipment was acquired at the beginning of the year at a cost of \$465,000. the equipment was depreciated using the straight-line method based on an estimated useful life of 15 years and an estimated residual value of \$45,000. required: a. what was the depreciation for the first year? b. assuming the equipment was sold at the end of the eighth year for \$235,000, determine the gain or loss on the sale of the equipment. c. journalize the entry to record the sale. refer to the chart of accounts for exact wording of account titles.

Employee                                 Mary      Zoe         Greg         Ann           Tom

Cumulative Pay                       \$6,800   \$10,500  \$8,400    \$66,000   \$4,700

Pay subject to FICA S.S.         \$421.60  \$651.00  \$520.80 \$4092.00 \$291.40
6.2%, (First \$118,000)

Pay subject to FICA Medicare \$98.60 \$152.25    \$121.80    \$957.00    \$68.15
1.45% of gross

Pay subject to FUTA Taxes      \$40.80  \$63.00     \$50.40    \$396.00  \$28.20
0.6%

Pay subject to SUTA Taxes   \$367.20  \$567.00  \$453.60  \$3564.00 \$253.80
5.4% (First \$7000)

Totals                                     \$928.20 \$1,433.25 \$1,146.60 \$9,009.00 \$641.55

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## Equipment acquired at the beginning of the year at a cost of \$340,000 has an estimated residual value of \$45,000 and an estimated useful life of 10 years. determine the following. round your answer for the straight-line rate to one decimal place, if necessary.

You need to determine the number of ways in which 30 competitors from 50 can qualify. First, you have to realize that the order is irrelevant, that is: it is the same competitor_1, competitor _2, competitor _3 than competitor_3, competitor_2, competitor_1, or any combination of those three competitors.

So, the number of ways is which 30 competitors from 50 can qualify is given by the formula of combinations, which is:

C (m,n) = m! / (n! * (m -n)! )

=> C (50,30) = 50! / (30! (50 – 30)! ) = (50!) / [30! (50 – 30)!] = 50! / [30! 20!] =

= 47,129,212,243,960 different ways the qualifiying round of 30 competitors can be selected from the 50 competitors.

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## On june 1, aaron company purchased equipment at a cost of \$120,000 that has a depreciable cost of \$90,000 and an estimated useful life of 3 years and 30,000 hours. ? using straight-line depreciation, calculate depreciation expense for the final (partial) year of service.

The Contribution Margin per unit (CM) can be calculated
from the difference of Selling Price per unit (SP) and Total Expenses per unit
(TE).

First, let’s calculate the value of SP:

SP = Sales / Units sold

SP = \$1,043,400 / 22,200 units sold

SP = \$47

Second, calculate all expenses:

Direct materials per unit = \$234,948 / 27,970 units
manufactured = \$8.4

Direct labor per unit = \$131,459 / 27,970 units
manufactured = \$4.7

Variable manufacturing overhead per unit = \$240,542 / 27,970
units manufactured = \$8.6

Variable selling expenses per unit = \$113,220 / 22,200
units sold = \$5.1

TE = \$26.8

Therefore the CM is:

CM = SP – TE

CM = \$47 – \$26.8

CM = \$20.2 per unit

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## A company used straight-line depreciation for an item of equipment that cost \$16,950, had a salvage value of \$4,200 and a six-year useful life. after depreciating the asset for three complete years, the salvage value was reduced to \$1,695 but its total useful life remained the same. determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

The Contribution Margin per unit (CM) can be calculated
from the difference of Selling Price per unit (SP) and Total Expenses per unit
(TE).

First, let’s calculate the value of SP:

SP = Sales / Units sold

SP = \$1,043,400 / 22,200 units sold

SP = \$47

Second, calculate all expenses:

Direct materials per unit = \$234,948 / 27,970 units
manufactured = \$8.4

Direct labor per unit = \$131,459 / 27,970 units
manufactured = \$4.7

Variable manufacturing overhead per unit = \$240,542 / 27,970
units manufactured = \$8.6

Variable selling expenses per unit = \$113,220 / 22,200
units sold = \$5.1

TE = \$26.8

Therefore the CM is:

CM = SP – TE

CM = \$47 – \$26.8

CM = \$20.2 per unit

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## The depreciation method that charges more expense in earlier years than in later years is the __________ A. straight-line method B. double declining-balance method C. units-of-production method D. all of the above

The answer would be: “Mere exposure effect”.

Explanation: The mere exposure effect is when an individual feels more preference for something that is familiar for them (They have been exposed to that before) than to a completely strange thing (something they haven’t been exposed to).

This is what happened to Jocelyn, she couldn’t stand her co-worker at first because it was the first time they saw and had to be around each other, but then, after some amount of time being exposed to one another, Jocelyn finally got over the topic and got used to her co-worker.