A Company Bought a Machine That Has an Expected Life

question 2

Multiple Choice

A company bought a machine that has an expected life of six years and no salvage value.Management estimates that this machine will generate annual after-tax net income of $700.If the accounting rate of return is 10%,what was the purchase price of the machine?

• A) $7,000
• B) $700
• C) $28,000
• D) $14,000
• E) $3,500

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Definitions:

Direct Materials

Raw materials that can be directly attributed to the production of a product, and are an integral part of the finished product.

Material A

This appears to be a placeholder term and may refer to a specific type of raw material or a key component used in manufacturing or production processes.

Material B

This term could refer to a secondary or alternative material used in manufacturing or production processes.

Pounds

A unit of weight measurement commonly used in Britain and the United States, equal to 0.453592 kilograms.