Use the Information Below to Answer the Following Question(s)

question 82

Multiple Choice

Use the information below to answer the following question(s) .Saturn Ltd.wants to automate one of its production processes.The new equipment will cost $180,000.In addition, Saturn will incur installation and testing costs of $5,000 and $8,500 respectively.The expected life of the equipment is 8 years and the salvage value of the equipment is estimated at $18,000.The annual cash savings are estimated at $32,000.The company uses straight-line depreciation and has a required rate of return of 14%.Ignore income taxes.
-What is the accrual accounting rate of return for the investment Saturn Ltd.is considering?

• A)5.2%
• B)16.5%
• C)4.0%
• D)5.9%
• E)11.0%

---

Definitions:

Journal Entry

A record of a financial transaction in accounting, detailing the accounts affected and the amounts.

Bank Service Charge

Fees charged by a bank to cover services provided to the account holder.

Ledger

A comprehensive collection of a company's financial transactions, recorded in a structured and systematic manner.

Petty Cash Fund

A small amount of cash kept on hand, used for paying minor expenses to avoid the complexity of writing cheques.