A Machine That Cost $36,000 and on Which $26,000 of Depreciation

question 155

Essay

A machine that cost $36,000 and on which $26,000 of depreciation had been recorded was disposed of for $10,400. Indicate whether a gain or a loss should be recorded, and for what amount.

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Definitions:

Net Present Value

A method of evaluating the attractiveness of an investment project, by determining the present value of its expected future cash flows minus the initial investment.

Net Present Value

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or project, calculating the difference between the present value of cash inflows and the present value of cash outflows over time.

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value.

Internal Rate

Likely referring to the Internal Rate of Return (IRR), which is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.