The Following Data Concerns a Proposed Equipment Purchase: Cost $144,000

question 15

Multiple Choice

The following data concerns a proposed equipment purchase: Cost $144,000
Salvage value $ 4,000
Estimated useful life 4 years
Annual net cash flows $ 46,100
Depreciation method Straight-line
Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is:

• A) $46,100
• B) $11,100
• C) $12,100
• D) $74,000
• E) $48,950

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Definitions:

IFRS

International Financial Reporting Standards; a set of accounting standards developed by the International Accounting Standards Board (IASB) that guide the preparation of financial statements globally.

Beginning Inventory

The value of all goods available for sale at the start of an accounting period.

Net Income

The net income of a business following the subtraction of all costs, taxes, and operational expenses from its revenue.

Straight-Line Depreciation

A method of allocating an asset's cost evenly over its useful life, resulting in a constant annual expense.