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Michael is an Internet service provider. On December 31, 2014, he bought an existing business with servers and a building worth $400,000. During 2015, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000.#1. What was Michael’s gross investment, depreciation, and net investment during 2015?#2. What is the value of Michael’s capital at the end of 2015?

Respuesta :

Explanation:

Data provided in the question

Building worth = $400,000

The new servers purchase cost = $500,000

And, the older serves fell by $100,000

So by considering the above information

1. The gross investment is

= The new servers purchase cost

= $500,000

The depreciation is

= Older serves falling value

= $100,000

And, the net investment is

= Gross investment - depreciation

= $500,000 - $100,000

= $400,000

2. Now the value of Michael capital at the end is

= $400,000 - $100,000 + $500,000

= $800,000

Michael is an Internet service provider :

Given Data :

  • Building worth = $400,000
  • The new servers purchase cost = $500,000
  • The older serves fell by $100,000

Part 1:

  • Gross investment

Gross investment  = The new servers purchase cost

Gross investment  = $500,000

  • Depreciation

Depreciation  = Older serves falling value

Depreciation = $100,000

  • Net investment

Net investment = Gross investment - depreciation

Net investment= $500,000 - $100,000

Net investment= $400,000

Part 2:

  • Value of Michael capital at the end = $400,000 - $100,000 + $500,000
  • Value of Michael capital at the end = $800,000

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