Upper Division of Lower Company acquired an asset with a cost of $620,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows. Year 1 2 3 4 Cash Flow $229,000 259,000 289,000 304,000 The cost of the asset is expected to increase at a rate of 10 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes. Assume that the company uses a 15 percent cos of capital. Required: a. What is the residual income for each year of the asset's life, using a historical cost approach? b. What is the residual income for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year? (Negative amounts should be indicated by a minus sign.) Year 1 Year 2 Year 3 Year 4 Residual Income Historical Cost Current Cost

Calculate the capitalized cost of an equipment maintained at a rate of 6% every year for $10,000, replaced every 3years for $25,000 at the same rate, and bought for $110,500.

In Year 1, Darw Inc. purchased equipment with an expected useful life of 5 years. The initial cost of the equipment was $85,000. Darw Inc.cost of capital is 12%. At the time it purchased the equipment, Darw Inc. projected the following cash inflows from use of the equipment:    Year Projected Cash Inflow 1 $20,000 2 $30,000 3 $35,000 4 $25,000 5 $15,000 At the end of Year 5, the equipment had reached the end of its useful life. Darw Inc.determined that it had actually generated the following cash flows:   Year Actual Cash Inflow $10,000 $20,000 $30,000 $30,000 $30,000   2. Calculate the net present value that the equipment achieved, based on the actual cash inflows.

Subject: acounting