Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 18E
To determine
Whether the old machine should be replaced.
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Chapter 16: Depreciation Methods
Dude & Sons have just purchased a machine
for $325,000 and an additional $25,000
charge for installation onto a truck for
mobility. The expected life is 30 years with a
salvage value of 10% of the purchase price.
For classical straight-line depreciation
determine the first cost, salvage value, annual
depreciation amounts and book value after 20
years?
QUESTION 7
An automated assembly robot that cost $378,000 has a depreciable life of 5 years with a $80,000 salvage value. The MACRS (Modified
Accelerated Cost Recovery System) depreciation rates for years 1, 2, 3, and 6 are 20.00%, 32.00%, 19.20%, and 5.76%, respectively.
What is the book value at the end of year 3? Year 5? Year 6?
The book value at the end of year 5, (in $)
Round to the nearest two (2) decimal places
Question 7
Warehouse A with a life of 10 years can be constructed now for $100,000 with no repair costs and a salvage value of $10,000. Alternatively, warehouse B with a life of 12 years can be constructed for $70,000 now with a salvage value of $5000, but requires $18,000 worth of repairs every 3 years. Both have equal usefulness and are needed indefinitely. Assuming the cost of money is 6%, which warehouse is a better deal and by most nearly how much per year?
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Chapter 13 Solutions
Survey Of Accounting
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Exercise 6-5AOpportunity costs Norman Dowd owns...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Exercise 6-11AEstablishing price for an...Ch. 13 - Exercise 6-12AOutsourcing decision with...Ch. 13 - Exercise 6-13AOutsourcing decision affected by...Ch. 13 - Prob. 14ECh. 13 - Exercise 6-15ASegment elimination decision Dudley...Ch. 13 - Prob. 16ECh. 13 - Exercise 6-17AAsset replacementopportunity cost...Ch. 13 - Prob. 18ECh. 13 - Exercise 6-19A Asset replacement decision Mead...Ch. 13 - Exercise 6-20A Asset replacement decision Kahn...Ch. 13 - Exercise 6-21A Annual versus cumulative data for...Ch. 13 - Problem 6-23A Context-sensitive relevance Required...Ch. 13 - Problem 6-24A Context-sensitive relevance...Ch. 13 - Problem 6-25A Effect of order quantity on special...Ch. 13 - Problem 6-26A Effects of the level of production...Ch. 13 - Problem 6-28A Eliminating a segment Western Boot...Ch. 13 - Effect of activity level and opportunity cost on...Ch. 13 - Problem 6-30A Comprehensive problem including...Ch. 13 - Prob. 29PCh. 13 - ATC 6-1 Business Application Case Analyzing...Ch. 13 - ATC 6-2 Group Assignment Relevance and cost...Ch. 13 - Prob. 3ATCCh. 13 - Prob. 4ATCCh. 13 - Prob. 5ATC
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- REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from 24,000 to 46,000 per year. The new machine will cost 80,000; and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm's WACC is 10%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.arrow_forwardProblem 6-14 NPV and Bonus Depreciation Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $475,000 is estimated to result in $199,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $72,000. The press also requires an initial Investment in spare parts inventory of $38,000, along with an additional $4,000 in Inventory for each succeeding year of the project. The shop's tax rate is 23 percent and its discount rate is 10 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) NPV S 618,123.75 Should the company buy and install the machine press? Yes Noarrow_forwardProblem 9 A contractor is considering the following three alternatives: a. Purchase a new microcomputer system for $15,000. The system is expected to last 6 years with salvage value of $1,000. b. Lease a new microcomputer system for $3,000 per year, payable in advance. The system should last 6 years. c. Purchase a used microcomputer system for $8,200. It is expected to last 3 with no salvage value. Use a common-multiple-of-lives approach. If MARR of 8% is used, which alternative should be selected using a discounted present worth analysis? If the MARR is 12%, which alternate should be selected? yearsarrow_forward
- Problem 11-13Replacement Analysis The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $80,000. It had an expected life of 10 years when it was bought and its remaining depreciation is $8,000 per year for each year of its remaining life. As older flange-lippers are robust and useful machines, this one can be sold for $20,000 at the end of its useful life. A new high-efficiency digital-controlled flange-lipper can be purchased for $140,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $55,000 per year, although it will not affect sales. At the end of its useful life, the high-efficiency machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $50,000. The firm's tax rate is 35%,…arrow_forwardExercise 13-17A (Algo) Asset replacement decisions-opportunity cost LO 13-5 Jordan Freight Company owns a truck that cost $42.000 Currently, the truck's book value is $22,000, and its expected remaining useful life is five years. Jordan has the opportunity to purchase for $30100 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,600 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $10,000 Required Calculate the total relevant costs. Should Jordan replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Total relevant costs Should Jordan replace or continue the old truck? Keep Old Replace the old truck Replace With Newarrow_forwardQuestion 17 options: 8-7. Disposal of asset. Dump It is selling a machine that no longer is large enough for the production requirements. Dump It has had the machine for 3 years and has depreciated it using the straight-line method. Original cost had been $98,000, and salvage was estimated at $6,000. The machine had been expected to last for 8 years. (in all answers round to nearest dollar; do not use "$" or commas in your answer) Calculate the amount of annual depreciation on the asset. Calculate the amount of accumulated depreciation on the asset at the end of the third year. Calculate the book value of the asset at the end of the third year.arrow_forward
- MODULE 5 8-7 DISPOSAL OF ASSET Please read the problem below and provide the correct answer along with an explanation of the answer. Thank you! Dump It is selling a machine that no longer is large enough for the production requirements. Dump It has had the machien for 3 years and has depreicated it using the straightline method. Original cost had been $98,000 and salvage was estimated at $6000. The machine has a life of 8 years. a) Journalize the sale of the imagine $70,000 b) Journalize teh sale of the machine for $50,000arrow_forwardQuestion 17 options: 8-7. Disposal of asset. Dump It is selling a machine that no longer is large enough for the production requirements. Dump It has had the machine for 3 years and has depreciated it using the straight-line method. Original cost had been $98,000, and salvage was estimated at $6,000. The machine had been expected to last for 8 years. (in all answers round to nearest dollar; do not use "$" or commas in your answer)arrow_forwardExercise 11-05 7 Your answer is partially correct. Try again. Concord Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $129,600. The company estimated that the machine would have a salvage value of $12,600 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.) (a) Straight-line depreciation for 2020 23,400 (b) Activity method for 2020, assuming that machine usage was 800 hours 4,680 (c) Sum-of-the-years'-digits for 2021 39,000 (d) Double-declining-balance for 2021 51,840 Click if you would like to Show Work for this question: Open Show Workarrow_forward
- MC algo 9-6 Calculating Salvage Value A company is evaluating a new 4-year project. The equipment necessary for the project will cost $3,100,000 and can be sold for $675,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's tax rate is 23 percent. What is the aftertax salvage value of the equipment? Multiple Choice $519,750 $560,819 $707,044 $675,000 $642,956arrow_forwardExercise 6-18A (Static) 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 $720,000 and has a current book value using straight-line depreciation of $400,000. • The old machine incurs operating expenses of $60,000 per year. • The current disposal value of the old machine is $170,000; if it is kept nine more years, its remaining value would be $20,000. • The replacement machine would cost $480,000 and have a useful life of nine years. • The replacement machine has an expected salvage value of $130,000 after nine years. • The replacement machine would require $26,000 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 Purchase New Machine Machine Total…arrow_forwardExercise 6-17A (Algo) Asset replacement-opportunity cost LO 6-5 Thornton Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $27,000, and its expected remaining useful life is five years. Thornton has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,000 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $18,000. Required Calculate the total relevant costs. Should Thornton replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Answer is not complete. Keep Old Total relevant costs Should Thornton replace or continue the old truck? Return to question Replace With New Replace the old truck.arrow_forward
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Fixed Asset Replacement Decision 1235; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=LJRzn9K8Nwk;License: Standard Youtube License