Exercise 6-18A (Algo) Asset replacement decision LO 6-5 Tesla management are trying to decide whether to keep an older piece of machinery or buy a replacement. Management was presented with the following information to assist in their decision: • The old machine was purchased three years ago for $315,000 and has a current book value using straight-line depreciation of $185,000. • The old machine incurs operating expenses of $36,000 per year. • The current disposal value of the old machine is $83,000; if it is kept eleven more years, its remaining value would be $11,000. • The replacement machine would cost $229,000 and have a useful life of eleven years. • The replacement machine has an expected salvage value of $73,000 after eleven years. • The replacement machine would require $10,000 per year in operating expenses. 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
Exercise 6-18A (Algo) Asset replacement decision LO 6-5 Tesla management are trying to decide whether to keep an older piece of machinery or buy a replacement. Management was presented with the following information to assist in their decision: • The old machine was purchased three years ago for $315,000 and has a current book value using straight-line depreciation of $185,000. • The old machine incurs operating expenses of $36,000 per year. • The current disposal value of the old machine is $83,000; if it is kept eleven more years, its remaining value would be $11,000. • The replacement machine would cost $229,000 and have a useful life of eleven years. • The replacement machine has an expected salvage value of $73,000 after eleven years. • The replacement machine would require $10,000 per year in operating expenses. 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
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter10: Long-lived Tangible And Intangible Assets
Section: Chapter Questions
Problem 21E
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