Rico Petricelli Industries invests $1,200,000 in a new plant asset with an estimated 15-year service life and
Question:
Rico Petricelli Industries invests $1,200,000 in a new plant asset with an estimated 15-year service life and no salvage value. These assets contribute $160,000 to annual net income when depreciation is computed on a straight-line basis. Compute the asset’s payback period.
Step by Step Answer:
The payback period is computed as ...View the full answer
Financial And Managerial Accounting The Basis For Business Decisions
ISBN: 9781264445240
20th Edition
Authors: Jan Williams, Susan Haka, Mark Bettner
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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