Early in January 2010, Tellco, Inc., acquired a new machine and incurred $100,000 of interest, installation, and
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Required:
a. Calculate the ROI for Tellco, Inc., for 2010.
b. Calculate the ROI for Tellco, Inc., for 2010, assuming that the $100,000 had been capitalized and depreciated over 10 years using the straight-line method.
c. Given your answers to a and b, why would the company want to account for this expenditure as an expense?
d. Assuming that the $100,000 is capitalized, what will be the effect on ROI for 2011 and subsequent years, compared to expensing the interest, installation, and overhead costs in 2010? Explain your answer.
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Related Book For
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,
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