Use the following to answer questions (Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that nee to be rebuilt or replaced. The following information has been gathered relative to this decision: Purchase cost new. Remaining book value.... Cost to rebuild now. years Major maintenance at the end of 3 Annual cash operating costs. Salvage value at the end of 5 years. Salvage value now..... New Present Equipment Equipment $50,000 $48,000 $30,000 $25,000 $8,000 $10,000 $3,000 $9,000 A) $(28,840) B) $(19,160) C) $(14,420) D) $(36,050) $5,000 $8,000 $7,000 Carlson uses the total cost approach and a discount rate of 12%. Regardless of which options chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its domestic manufacturing operations and to move these operations to foreign countries. 93. If the new equipment is purchased, the present value of all cash flows that occur now is: A) $(48,000) B) $(39,000) C) $(41,000) D) $(37,000) Answer: B Level: Easy LO: 1 94. If the new equipment is purchased, the present value of the annual cash operating com associated with this alternative is: Answer: A Level: Medium LO: 1 95. If the equipment is rebuilt, the present value of all cash flows that occur now is: A) $(55,000) B) $(25,000) C) $(16,000) D) $(23,000) Answer: B Level: Easy LO: 1
Use the following to answer questions (Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that nee to be rebuilt or replaced. The following information has been gathered relative to this decision: Purchase cost new. Remaining book value.... Cost to rebuild now. years Major maintenance at the end of 3 Annual cash operating costs. Salvage value at the end of 5 years. Salvage value now..... New Present Equipment Equipment $50,000 $48,000 $30,000 $25,000 $8,000 $10,000 $3,000 $9,000 A) $(28,840) B) $(19,160) C) $(14,420) D) $(36,050) $5,000 $8,000 $7,000 Carlson uses the total cost approach and a discount rate of 12%. Regardless of which options chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its domestic manufacturing operations and to move these operations to foreign countries. 93. If the new equipment is purchased, the present value of all cash flows that occur now is: A) $(48,000) B) $(39,000) C) $(41,000) D) $(37,000) Answer: B Level: Easy LO: 1 94. If the new equipment is purchased, the present value of the annual cash operating com associated with this alternative is: Answer: A Level: Medium LO: 1 95. If the equipment is rebuilt, the present value of all cash flows that occur now is: A) $(55,000) B) $(25,000) C) $(16,000) D) $(23,000) Answer: B Level: Easy LO: 1
Century 21 Accounting General Journal
11th Edition
ISBN:9781337680059
Author:Gilbertson
Publisher:Gilbertson
Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets
Section: Chapter Questions
Problem 1CP
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Use the following to answer questions 93-95:
(Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that n
to be rebuilt or replaced. The following information has been gathered relative to this
decision:
Purchase cost new
Remaining book value..
Cost to rebuild now
Major maintenance at the end of 3 years
Annual cash operating costs.
Salvage value at the end of 5 years.
Salvage value now.......
New
Present
Equipment Equipment
$48,000
A) $(48,000)
B) $(39,000)
C) $(41,000)
D) $(37,000)
$50,000
$30,000
$25,000
$8,000
$10,000
$3,000
$9,000
Carlson uses the total cost approach and a discount rate of 12%. Regardless of which option is
chosen, rebuild or replace, at the end of five years Carlson Manufacturing plans to close its
domestic manufacturing operations and to move these operations to foreign countries.
A) $(28,840)
B) $(19,160)
C) $(14,420)
D) $(36,050)
$5,000
$8,000
$7,000
93. If the new equipment is purchased, the present value of all cash flows that occur now
is:
Answer: B Level: Easy LO: 1
94. If the new equipment is purchased, the present value of the annual cash operating costs
associated with this alternative is:
Answer: A Level: Medium LO: 1
95. If the equipment is rebuilt, the present value of all cash flows that occur now is:
A) $(55,000)
B) $(25,000)
C) $(16,000)
D) $(23,000)
Answer: B Level: Easy LO: 1
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