Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Suppose Refrigerator A costs \$1,200 with annual operating costs of \$200, and Refrigerator B costs \$900 with annual operating costs of \$300. After how many years will the average annual cost of the two refrigerators be equal?

3 years

9 years

6 years

4 years

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Verified step by step guidance

Step 1: Define the average annual cost formula for each refrigerator. The average annual cost is calculated as the total cost (purchase price + cumulative operating costs) divided by the number of years.

Step 2: Write the equations for the average annual cost of Refrigerator A and Refrigerator B. For Refrigerator A: $ \text{Average Annual Cost}_A = \frac{1200 + 200n}{n} $, and for Refrigerator B: $ \text{Average Annual Cost}_B = \frac{900 + 300n}{n} $, where $ n $ is the number of years.

Step 3: Set the two average annual cost equations equal to each other to find the year $ n $ when the costs are equal: $ \frac{1200 + 200n}{n} = \frac{900 + 300n}{n} $.

Step 4: Simplify the equation by multiplying through by $ n $ (assuming $ n \neq 0 $) to eliminate the denominator: $ 1200 + 200n = 900 + 300n $.

Step 5: Solve for $ n $ by isolating $ n $ on one side of the equation: $ 1200 - 900 = 300n - 200n $, which simplifies to $ n = \frac{300}{100} $.