FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:A machine purchased three years ago for $318,000 has a current book value using straight-line depreciation of $192,000; its operating
expenses are $39,000 per year. A replacement machine would cost $227,000, have a useful life of nine years, and would require
$10,000 per year in operating expenses. It has an expected salvage value of $71,000 after nine years. The current disposal value of
the old machine is $81,000; if it is kept 9 more years, its residual value would be $18,000.
Required
Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced?
Keep Old
Machine
Total costs
Should the old machine be replaced?
Purchase New
Machine
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