**Asset Replacement Decision** Birch Company owns a piece of equipment that cost $95,000. Currently, the equipment’s book value is $43,000 and its expected remaining useful life is four years. The salvage value of the truck in four years is expected to be $20,000. Birch has the opportunity to purchase $108,000 replacement equipment that is extremely efficient. In four years, the new equipment would have a salvage value of $75,000. Maintenance cost for the old equipment is expected to be $5,500 per year and maintenance on the new equipment is expected to be $2,500 per year. The old equipment is paid for but, in spite of being in good condition, can be sold for only $34,400 currently. Should Birch replace the old equipment with the new efficient equipment, or should it continue to use the old equipment until it wears out? *Include your calculations with your answer.* **Answer:**

Asset Replacement Decision Birch Company owns a piece of equipment that cost $95,000. Currently, the equipment’s book value is $43,000 and its expected remaining useful life is four years. The salvage value of the truck in four years is expected to be $20,000. Birch has the opportunity to purchase $108,000 replacement equipment that is extremely efficient. In four years, the new equipment would have a salvage value of $75,000. Maintenance cost for the old equipment is expected to be $5,500 per year and maintenance on the new equipment is expected to be $2,500 per year. The old equipment is paid for but, in spite of being in good condition, can be sold for only $34,400 currently. Should Birch replace the old equipment with the new efficient equipment, or should it continue to use the old equipment until it wears out? Include your calculations with your answer. Answer:

Name: **Asset Replacement Decision**Birch Company owns a piece of equipment
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Description: **Asset Replacement Decision**Birch Company owns a piece of equipment that cost $95,000. Currently, the equipment’s book value is $43,000 and its expected remaining useful life is four years. The salvage value of the truck in four years is expected

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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