Day: March 2, 2021

A company considers buying a new machine costing £60,000. The machine will have a life of four years. It will then have a scrap value of £10,000.

The company has a straight line depreciation policy. The table shows the forecast net receipts arising from the purchase of the machine. 

How long will it take the company to ‘pay back’ its investment? 

Select ONE answer:

1. 1 year, 197 days
2. 1 year, 309 days
3. 2 years, 182 days
4. 3 years

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – £60k – Y1 £20k – Y2 £20k – Y3 £20k

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