Bev Is Considering Purchasing a New Button Holer for Her

question 38

Multiple Choice

Bev is considering purchasing a new button holer for her business. She estimates the machine will cost $90,000 and will be paid for in cash. Her cash savings from the first 4 years of operation of the machine will be $20,000 in year 1, $30,000 in year 2, $35,000 in year 3 and $35,000 in year 4. The payback period for the machine is:

• A)4 years.
• B)3.86 years.
• C)3.14 years.
• D)2.66 years.

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Definitions:

Increase Side

The side of an accounting ledger where increases in account balances are recorded, typically the left side for assets and expenses, and the right side for liabilities, equity, and income.

Decrease Side

The side of an account used to record decreases in assets, expenses, or increases in liabilities and equity.

Ledger

A comprehensive collection of a company's financial transactions, organized by account.

Alphabetical Order

A method of sorting by arranging items according to the sequence of letters in the alphabet.