FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
a. Determine the economic lives for assets A and B.
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Transcribed Image Text:a. Determine the economic lives for assets A and B.
The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Asset First Cost A B $130,000 $130,000 Initial Operating Cost $35,000 $35,000 Rate of Operating Cost Increase 11.5%/year 11.5%/year MARR 5% 25%
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Transcribed Image Text:The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Asset First Cost A B $130,000 $130,000 Initial Operating Cost $35,000 $35,000 Rate of Operating Cost Increase 11.5%/year 11.5%/year MARR 5% 25%
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Step 1: Defining economic life.
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Step 2: Ascertaining Economic life of Asset A
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Step 3: Ascertaining useful life of Asset B
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