Question

Post a response in 75 to 100 words where you evaluate the following quotation:

• We shall have no difficulty in paying for new plant assets needed during the coming year because our estimated outlays for new equipment amount to only $80,000, and we have more than twice that amount in our Accumulated Depreciation account at present.

Answer 1

Ans:

The meaning of quotation" We shall have no difficulty in paying for new plant assets needed during the coming year because our estimated outlays for new equipment amount to only $80,000, and we have more than twice that amount in our Accumulated Depreciation account at present" is as follows:

The purpose of accumulated depreciation account is to create a reserve in a systematic manner out of the business earnings for replacement of existing asset over its useful life. As stated company requires $ 80000 for new asset and it already reserve which is equivalent to double of amount for the purpose thus, they wouldn't be having any shortage of fund for procuring the asset as the provision was already made over the years for the purpose. And double the amount will also help to cover the tax , delivery and installation cost with regard to new asset.