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9. The manager of Think-Smart, Inc. is considering a proposal to replace a machine currently used in production with a new one at a cost of $700,000. The following yearly comparative data has been gathered: Old machine 50,000 $280,000 $20,000 Total costs $260,000 $300,000 The old machine has a current book value of $300,000, and a current salvage value of $250,000. Both machines have comparable remaining service lives of four years and have expected salvage values at the end of their service lives of $10,000. (Ignore income taxes and the time value of money.) What is the net advantage (disadvantage) of replacing the old machine? Units to be processed Cash operating expenses Straight-line depreciation expenses New machine 50,000 $200,000 $60,000 a. $80,000 b. ($500,000) c. ($130,000) d. ($380,000) e. None of the above

9. The manager of Think-Smart, Inc. is considering a proposal to replace a machine currently used in production with a new one at a cost of $700,000. The following yearly comparative data has been gathered: Old machine 50,000 $280,000 $20,000 Total costs $260,000 $300,000 The old machine has a current book value of $300,000, and a current salvage value of $250,000. Both machines have comparable remaining service lives of four years and have expected salvage values at the end of their service lives of $10,000. (Ignore income taxes and the time value of money.) What is the net advantage (disadvantage) of replacing the old machine? Units to be processed Cash operating expenses Straight-line depreciation expenses New machine 50,000 $200,000 $60,000 a. $80,000 b. ($500,000) c. ($130,000) d. ($380,000) e. None of the above

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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9. The manager of Think-Smart, Inc. is considering a proposal to replace a machine currently used in production with a new one at a cost of $700,000. The following yearly comparative data has been gathered: Old machine New machine 50,000 50,000 $200,000 $280,000 $60,000 $20,000 Total costs $260,000 $300,000 The old machine has a current book value of $300,000, and a current salvage value of $250,000. Both machines have comparable remaining service lives of four years and have expected salvage values at the end of their service lives of $10,000. (Ignore income taxes and the time value of money.) What is the net advantage (disadvantage) of replacing the old machine? Units to be processed Cash operating expenses Straight-line depreciation expenses a. $80,000 b. ($500,000) c. ($130,000) d. ($380,000) e. None of the above
Transcribed Image Text:9. The manager of Think-Smart, Inc. is considering a proposal to replace a machine currently used in production with a new one at a cost of $700,000. The following yearly comparative data has been gathered: Old machine New machine 50,000 50,000 $200,000 $280,000 $60,000 $20,000 Total costs $260,000 $300,000 The old machine has a current book value of $300,000, and a current salvage value of $250,000. Both machines have comparable remaining service lives of four years and have expected salvage values at the end of their service lives of $10,000. (Ignore income taxes and the time value of money.) What is the net advantage (disadvantage) of replacing the old machine? Units to be processed Cash operating expenses Straight-line depreciation expenses a. $80,000 b. ($500,000) c. ($130,000) d. ($380,000) e. None of the above
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