Question

Annie runs a fitness center. On December 31, 2016, she bought an existing business with exercise...

Annie runs a fitness center. On December 31, 2016, she bought an existing business with exercise equipment and a building worth $500,000.During 2017, business improved, and she bought some new equipment for $300,000.At the end of 2017, her equipment and buildings were worth $785,000. Calculate Annie's gross investment during 2017.

Calculate Annie's net investment during 2017.

Calculate Annie's depreciation during 2017.

Homework Answers

Answer #1

Answer

Important concept ot understand: When we talk about Gross/ Net Investment in 2017, it also includes the investments remaining from the past years. This is because the Balance Sheet shows the sum of all investments as one figure.

Part a)

Annie's Gross investment during 2017 = Exercise equipment and building (2016) + New equipment (2017)

= $500,000 + $300,000.

= $800,000

Part b)

Annie's Net investment during 2017 = Gross Investment - Depreciation

=  $785,000 (value given as it is in the question)

Part c)

Annie's depreciation during 2017 = Gross Investment - Net Investment

= $ 800,000 -  $785,000.

= $15,000

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