Reference no: EM133008410
Erica trades as a financial adviser. She rents an office in the town centre and employs three full-time staff. She advises clients on how to manage their savings, investments and pension funds. Erica decided that she needed a new computer system for the business in order to improve efficiency.
The following expenditure was incurred when the new system was purchased:
Cost of computer $1900
Paper, ink cartridges and other consumables $110
Cost of colour laser printer $450
Installation and testing costs $200
Staff training on new system $500
Annual insurance against theft and breakdowns $90
Cost of rewiring to accommodate new computer $340
Annual maintenance agreement $99
Problem a. Calculate the total of capital expenditure incurred by Erica's business when acquiring the computer system.
Problem b. To what extent would the business's profits have been reduced by the expenditure listed.
Problem c. If Erica had borrowed $3000 to pay for the new computer system, how would the interest payments on the loan have affected the business's revenue expenditure and profit?