(Ignore Income Taxes in This Problem) the Management of Boie

question 95

Multiple Choice

(Ignore income taxes in this problem) The management of Boie Corporation is considering the purchase of a machine that would cost $330,980 and would have a useful life of 6 years. The machine would have no salvage value. The machine would reduce labor and other operating costs by $76,000 per year. The internal rate of return on the investment in the new machine is closest to:

• A) 11%
• B) 10%
• C) 12%
• D) 7%

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to update account balances before preparing financial statements.

Unearned Service Revenue

Represents payments received for services that have not yet been performed or delivered, classified as a liability on the balance sheet.

Advance Payment

Money paid before it is due or for goods or services before they are received.

Adjusting Entries

At the conclusion of an accounting cycle, entries recorded to accurately distribute revenues and costs to their respective periods.