Watson Corporation Is Considering Buying a Machine for $25,000

question 32

Multiple Choice

Watson Corporation is considering buying a machine for $25,000.Its estimated useful life is 5 years,with no salvage value.Watson anticipates annual net income after taxes of $1,500 from the new machine.What is the accounting rate of return assuming that Watson uses straight-line depreciation and that income is earned uniformly throughout each year?

• A)6.0%.
• B)8.0%.
• C)8.5%.
• D)10.0%.
• E)12.0%.

Understand and apply the concepts of group and composite depreciation.

Interpret the financial statement implications of depreciation, including its effect on the rate of return on assets.

Understand the requirements for and implications of asset impairment.

Apply depreciation methods and principles to complex scenarios, including disposals and changes in estimations.

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Definitions:

Synthesis

The process of combining different ideas, beliefs, or objects to form a coherent whole.

Design Disruption

involves innovations or transformations in design that significantly alter the market or the way products are perceived and used.

Authenticity Quadrant

A concept used to evaluate the genuineness of a brand or product through various perspectives or dimensions.

Brand

The unique design, symbol, name, or combination thereof that serves to identify and differentiate a product or service from those of competitors.