Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 1Annual rate of return% Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. Thefollowing information has been collected on this investment:CostOld EquipmentAccumulated depreciationRemaining lifeCurrent salvage valueSalvage value in 8 yearsAnnual cash operating costs$80,640$40.6008 years$10,400$0$35,100New EquipmentCostEstimated useful lifeSalvage value in 8 yearsAnnual cash operating costs$39,0008 years$4,600$29.900Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipmentover an eight-year period with salvage value of $4,600.

The rate of return refers to the profit earned over an investment made by the investors. It is…

Answered: Shamrock Inc. is considering…

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets

Section: Chapter Questions

Problem 1AFE

See similar textbooks

Similar questions

Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. Dunedin buys equipment frequently and wants to print a depreciation schedule for each assets life. Review the worksheet called DEPREC that follows these requirements. Since some assets acquired are depreciated by straight-line, others by units of production, and others by double-declining balance, DEPREC shows all three methods. You are to use this worksheet to prepare depreciation schedules for the new machine.
Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?
Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, two flight simulators were purchased by a space camp for 77,000 each with a salvage value of 5,000 each and estimated useful lives of eight years. On January 1, 20-2, the hydraulic system for Simulator A was replaced for 6,000 cash and an updated computer for more advanced students was installed in Simulator B for 9,000 cash. The hydraulic system is expected to extend the life of Simulator A three years beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Simulators A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each simulator for 20-2 through 20-8.
IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE CALCULATION OF DEPRECIATION On January 1, 20-1, Dans Demolition purchased two jackhammers for 2,500 each with a salvage value of 100 each and estimated useful lives of four years. On January 1, 20-2, a stronger blade to improve performance was installed in Jackhammer A for 800 cash and the compressor was replaced in Jackhammer B for 200 cash. The compressor is expected to extend the life of Jackhammer B one year beyond the original estimate. REQUIRED 1. Using the straight-line method, prepare general journal entries for depreciation on December 31, 20-1, for Jackhammers A and B. 2. Enter the transactions for January 20-2 in a general journal. 3. Assuming no other additions, improvements, or replacements, calculate the depreciation expense for each jackhammer for 20-2 through 20-4.
Crane Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,900 $278,300 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,100 Estimated annual cash outflows $7,600 $14,800 Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. Machine A Machine B Net present value top row, profitability index bottom row Which machine should be purchased? Crane Corp. should purchase select a machine .
Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,640 $40.600 8 years $10,400 $0 $35,100 New Equipment Cost Estimated useful life Salvage value in 8 years Annual cash operating costs $39,000 8 years $4,600 $29.900 Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600.
Current Attempt in Progress Sheridan Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $80,000 $40,000 8 years $9,800 Annual rate of return $0 eTextbook and Media $35,000 Your answer is incorrect. Cost New Equipment Estimated useful life Salvage value in 8 years Annual cash operating costs Depreciation is $10,000 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,400. Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 15.25%.) $39,000 % 8 years $4,400 $29,000 Save for Later Last saved 2 days ago. Saved work will be auto-submitted on the due date. Auto- submission can take up to 10 minutes. Using…
Skysong Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset $11,400 Book value of old asset $2,000 Selling price of old asset $2,000 Purchase price of new replacement asset $19.900 Estimated salvage value of new asset $1,900 Estimated useful life of new asset Estimated annual net operating cash inflows 5 years $3,000/year for 5 years Discount rate Tax rate 11% 20%
Mr. Adamson is planning to acquire a new Cold Room to replace its existing unit which they use to preserve their goods. Pertinent data are given below. for existing Cold Room: for new Cold Room: Investment P580, 000.00 P1,025, 000.00 Life 5 years remaining 12 years Salvage Value P20,600.00 P25,000.00 Variable Cost P232,000.00 P35,000.00 per year Which is profitable if money is worth 10%?
Swifty Corp. is considering purchasing one of two new processing machines. Either machine would make it possible for the company to produce its products more efficiently than it is currently equipped to do. Estimates regarding each machine are provided below: Machine A Machine B Original cost $113,400 $270,000 Estimated life 10 years 10 years Salvage value -0- -0- Estimated annual cash inflows $29,700 $60,400 Estimated annual cash outflows $7,500 $15,000 (a) Calculate the net present value and profitability index of each machine. Assume an 8% discount rate. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 589.71. Enter negative amounts using either a negative sign preceding the number e.g. -45.35 or parentheses e.g. (45.35).) Machine A Machine B

SEE MORE QUESTIONS

Recommended textbooks for you

Century 21 Accounting General Journal

Accounting

ISBN:

9781337680059

Author:

Gilbertson

Publisher:

Cengage

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Century 21 Accounting General Journal

Accounting

ISBN:

9781337680059

Author:

Gilbertson

Publisher:

Cengage

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

College Accounting, Chapters 1-27

Accounting

ISBN:

9781337794756

Author:

HEINTZ, James A.

Publisher:

Cengage Learning,

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

Excel Applications for Accounting Principles

Accounting

ISBN:

9781111581565

Author:

Gaylord N. Smith

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS