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Dear John,
Reference to question 5 June 2012, and particularly part (d) the option of investing in new machine which cost $2.12M, I have noticed that the depreciation charge has been taken into account at the time of calculating the revised net profit, but on the other hand the net asset (Investment) only updated by the cost of the machine without deducting the the accumulated depreciation which should be 40,000*12 =480,000.
Could you pls. clarify this point.
Regards
i think we have to take asset at cost value and profit after depreciation is taken
If i am wrong pease correct me Sir
and further more i want to ask how the net profit of $132,000 has been calculated while considering RI of the investment alone?
thank uIt is because for ROI we normally take the opening new assets (the balance at the beginning of the year). It is not a strict rule – in real life you could decide your own policy – but the logic is that it is the assets at the start of the year that generate the profit for the year.
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