1. Compare the costs of Version 1 POS and Version 2 POS. Consider the cumulative results for the three years together, ignoring the time value of money and income taxes. 2. Advise Mr. Williams on the factors that determine whether a revenue or cost item is relevant
1. Compare the costs of Version 1 POS and Version 2 POS. Consider the cumulative results for the three years together, ignoring the time value of money and income taxes. 2. Advise Mr. Williams on the factors that determine whether a revenue or cost item is relevant
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter9: Operating Activities
Section: Chapter Questions
Problem 1QE
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Question
1. Compare the costs of Version 1 POS and Version 2 POS. Consider the cumulative results
for the three years together, ignoring the time value of money and income taxes.
2. Advise Mr. Williams on the factors that determine whether a revenue or cost item is relevant
for management at Carib Systems and indicate whether he should accept the proposal.
![Don Williams is General manager of Carib Systems who received a proposal to replace the
Version 1 with Version 2 Point of Sales (POS) equipment at the company. Williams collects
data about the proposal on Version 1 and Version 2 as follows:
Version 1 POS
Version 2 POS
Original cost
$425,000
$170,000
Useful life
5 years
3 уears
Current age
2 уears
O years
Remaining useful life
3 уears
3 усars
Accumulated depreciation
$195,000
Not purchased yet
Current book value
$230,000
Not purchased yet
Current disposal value (in cash)
$120,000
Not purchased yet
Final disposal value (in cash 3 years from now)
$0
$0
Annual POS cash operating costs
S60,000
$20,000
Annual revenues
$1,250,000
$1,250,000
Annual non POS related operating costs
$920,000
$920,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F22ac8228-7deb-4b2f-9b14-d558209012e7%2F2c97636c-45ae-4c4f-adc3-9d55e605d868%2Fwbjv2e2_processed.png&w=3840&q=75)
Transcribed Image Text:Don Williams is General manager of Carib Systems who received a proposal to replace the
Version 1 with Version 2 Point of Sales (POS) equipment at the company. Williams collects
data about the proposal on Version 1 and Version 2 as follows:
Version 1 POS
Version 2 POS
Original cost
$425,000
$170,000
Useful life
5 years
3 уears
Current age
2 уears
O years
Remaining useful life
3 уears
3 усars
Accumulated depreciation
$195,000
Not purchased yet
Current book value
$230,000
Not purchased yet
Current disposal value (in cash)
$120,000
Not purchased yet
Final disposal value (in cash 3 years from now)
$0
$0
Annual POS cash operating costs
S60,000
$20,000
Annual revenues
$1,250,000
$1,250,000
Annual non POS related operating costs
$920,000
$920,000
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