Given the Following Project Information and Assuming Straight-Line Depreciation to Zero

question 353

Multiple Choice

Given the following project information and assuming straight-line depreciation to zero, what is the discounted payback period? Initial investment = $500,000; life = five years; cost savings = $160,000
Per year; salvage value = $30,000 in year 5; tax rate = 34%; discount rate = 13%.

• A) Two years
• B) Three years
• C) Four years
• D) Five years
• E) The discounted payback period is greater than the project's life.

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Definitions:

Adjusting Entry

An adjusting entry is a journal entry made at the end of an accounting period to record any unrecognized income or expenses for that period, ensuring the accounts comply with the accrual basis of accounting.

Direct Write-off Method

An accounting method where uncollectible debts are charged directly to expense as they are deemed to be uncollectible, not matching expenses to related revenues.

Allowance Method

An accounting technique that estimates and accounts for bad debts or credit losses in financial statements.

Uncollectible Receivables

Accounts receivable that a company does not expect to collect and writes off as a loss.