Question

On January 1, 2016, Sophie's Internet Cafe owned 10 computer terminals valued at $8,000 During 2016, Sophie's bought 5 new computer terminals at a cost of $1,250 each, and at the end of the year, the market value of all of Sophie's computer terminals was $9,000. What was Sophie's gross investment, net investment, and depreciation?

Sophie's gross investment during 2016 was S
Sophie's net investment during 2016 was $
Sophie's depreciation during 2016 was $

Answer 1

Sophie's gross investment during 2016 was $14,250. Sophie's net investment during 2016 was $1,000. Sophie's depreciation during 2016 was $13,250.

Step-by-step explanation:

Sophie's gross investment during 2016 would be the total cost of all the computer terminals owned at the beginning of the year plus the cost of the new computer terminals purchased during the year. In this case, the gross investment would be $8,000 (value of initial computer terminals) + ($1,250 x 5) (cost of new computer terminals) = $8,000 + $6,250 = $14,250.

Sophie's net investment during 2016 would be the change in the value of the computer terminals from the beginning of the year to the end of the year. In this case, the net investment would be the market value of all the computer terminals at the end of the year minus the initial value of the computer terminals. The net investment would be $9,000 (market value of computer terminals at the end of the year) - $8,000 (value of initial computer terminals) = $1,000.

The depreciation can be calculated as the difference between the gross investment and the net investment. In this case, the depreciation would be $14,250 (gross investment) - $1,000 (net investment) = $13,250.