On 1 January, Rick's Photo owned $50,000 of equipment. During the year, the value of the equipment fell by $10,000, plus Rick bought $25,000 in new equipment. Rick's company experienced ________ because ________.

Question

Quizplus · Accepted Answer

Net investment is calculated by subtracting depreciation from gross investment. In this case, Rick bought $25,000 in new equipment (gross investment) and the value of the equipment fell by $10,000 (depreciation), so the net investment is $15,000 ($25,000 - $10,000).

On 1 January, Rick's Photo Owned $50,000 of Equipment