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I tried to understand the answer for this question but got mixed up for the figures mentioned for Capital Employed end of 20×2
Can you please explain from it got such figures?
The capital employed at the start of the year was 2M + 0.2M = $2.2M but right at the beginning of the year they bought a new machine which increased the capital employed to 2.2 + 0.8 + 0.1 = $3.1M
At the end of the year, the assets are the same but depreciation will have been deducted. On the existing assets the depreciation is 0.4M and on the new machine it is 0.8/4 = 0.2M. So total depreciation of $0.6M.
So the total at the end of the year is 3.1 – 0.6 = $2.5M
The mid-year value (the average) = (3.1 + 2.5) / 2 = $2.8M
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