Assume Urgent Care paid $42,000 for X-ray equipment four years ago. The equipment was expected to have a useful life of 10 years from the date of acquisition with annual operating costs of $25,000. Technologicaladvances have made the machine purchased four years ago obsolete with a zero salvage value. An improved X-ray device incorporating the new technology is available at an initial cost of $50,000 and annualoperating costs of $15,000. The new machine is expected to last only six years before it, too, is obsolete. Asked to analyze the financial aspects of replacing the obsolete but still functional machine, an Urgent Careaccountant prepared the following analysis. After looking over these numbers, the company's manager rejected the proposal.Perform an analysis of relevant costs to determine whether the manager made the correct decision. Cost of new machineAdvantage (disadvantage) of replacement. .50,000)15$15, 200 Six-year savings [($25,000 - $15,000) x 6]Cost of new machine ....Undepreciated cost of old machine [($42,000/10) × 6].Advantage (disadvantage) of replacement..$ 60,000(50,000)25,200$ 15,200

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Answered: Assume Urgent Care paid $42,000 for…

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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The following annual costs are associated with three new extruder machines being considered for use in a Styrofoam cup plant: Data Useful Life, Years First Cost Salvage Value Annual Benefit M&O M&O Gradient X 17 $2,090,000 $87,000 $396,000 $56,000 $9,000 X-TRUD 13 $2,610,000 $93,000 $534,000 $60,000 $11,000 SUPR-X 11 $2,430,000 $119,000 $638,000 $53,000 $13,000 The company's interest rate (MARR) is 21%. Which extruder should the Styrofoam company choose? Use Annual Cash Flow Analysis and provide the right reason. Choosing SUPR-X is best because it has the lowest M&O cost in yr1 Choosing SUPR-X is best because it has the highest Annual Benefit Choosing SUPR-X will maximize the EUAB-EAUC; its value is $-127,486 higher than X and $15,650 higher than X-TRUD. Choosing SUPR-X will maximize the EUAB-EAUC; its value is $117,514 higher than X and $126,650 higher than X-TRUD.
A remotely located air sampling station can be powered by solar cells or by running an above ground electric line to the site and using conventional power. Solar cells will cost $17,200 to install and will have a useful life of 5 years with no salvage value. Annual costs for inspection, cleaning, and other maintenance issues are expected to be $2,000. A new power line will cost $25,500 to install, with power costs expected to be $1,000 per year. Since the air sampling project will end in 5 years, the salvage value of the line is considered to be zero. At an interest rate of 10% per year and using an AW analysis, what must be the first cost of the above ground line to make the two alternatives equally attractive economically? The first cost of the above ground line to make the two alternatives equally attractive economically is $-1
2) The initial cost of a new m/c is $10,000. The annual operating cost is $1,000/yr for first 3 years, and then becomes $3,000/yr after that. The m/c needs a major repair at the end of 5th year, which costs $5,000. The m/c has 10 years useful life with salvage value of $4,000. Calculate EUAC for keeping the m/c for 10 years. (i=10%/yr)
Lifeline Biofuels bult an oil rig at a cost of $4.5 million that it places into service on the first day of the current year. The company estimates the oil rig will have a useful life of 20 years (with no salvage value), after which Federal regulations require that the oil rig must be dismantled and the land area restored. The expected fair value of this asset retirement project is $845,000. The present value of these asset retirement costs is $263,000 based on the 6% after - tax discount rate Under US. GAAP, what is the company's accretion expense for the first year? A. $42,250 OB. $15.780 OC. $13,150 OD. S0
Please solve and show work. The correct answer should be 13.7
I need the solution in handwriting The following are the cost of a system and the useful life is five years. The salvage value for depreciation purpose is equal to 25% of the hardware cost Item Cost Hardware $170,000 Training Installation $18,000 $18,000 a) What is the book value of the system at the end of year three if Straight line method is used? b) Suppose that after depreciation of the system for two years with straight line, the company decides to switch to the decline method for the reminder of the system life (depreciation rate 30%). What is the system Book Value at the end of four years? (
A cooling water pumping station at a manufacturing plant in N City cost $30,000,000 to construct, and it is projected to have a 25-year life with an estimated salvage value of 10% of the construction cost. If the cooling water pumping station will be book-depreciated to zero over a recovery period pf 30 years, calculate d_10 using the double declining balance method.
Major medical complexes and their service providers continue to move toward advanced health informatics – acquiring, managing, and using information to provide better healthcare. A new analyzer for researching and evaluating patient samples, and making informed recommendations in the treatment of complex blood cancers, is purchased for $270,000. It is estimated to have a useful life of 6 years and to be sold at the end of that time for $9,000. Develop a table showing the depreciation and book value for each year using both the Excel® DDB worksheet function and the Excel® SLN worksheet function such that the depreciation switches from double declining balance to straight-line at the optimum time. Year 1 2 3 4 5 $ LA LA $ Depreciation LA tA LA $ Book Value
The equipment was purchased 3 years ago by the Ajax Corporation for $1,20,000. When purchased, it had an expected service life of 10 years, an estimated salvage of $25,000 after 10 years and AOC of $30,000. Current account book value is $80,000. The system is deteriorating rapidly; 3 more years of use and then salvaging it for $10,000 are now the expectations. The AOC is averaging $30,000. An improved version is offered today for $100,000 with a trade-in of $70,000 for the current system. The price goes up next week to $110,000 with a trade in of $70,000. The engineer estimates the new equipment to have useful life of 10 years, a salvage of $20,000, and an AOC of $20,000. A $70,000 market value appraisal of the current machine was made today. What would be the decision, if a replacement study is made today.
A local hospital has the following replacement decision problem:Old machine: The hospital purchased a digital image-processing machinethree years ago at a cost of $50,000. The machine had an expected life ofeight years at the time of purchase and an expected salvage value of $8,000at the end of the eight years. However, the old machine has been slow athandling the increased business volume, so management is consideringreplacing it. The old machine can be sold today for $12,000. New machine: A new machine can be purchased for $80,000, includinginstallation costs. Over its five-year life, the new machine will reduce cashoperating expenses by $30,000 per year. Sales are not expected to change.At the end of its useful life, the new machine is estimated to be worthless.The hospital's interest rate for project justification is known to be 12%. The hospital does not expect a better machine (other than the current challenger) to be available for the next five years. Assume that the economic…
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PLEASE SOLVE THIS TWO PROBLEMS ASAP. THANK YOU! A. A machine costs P388868 with a salvage value of P18029 is expected to last for 28537 hours in 5 years. In the first year of service it was used for 8077 hours. Compute the book value at the end of the first year. B.The cost of a certain asset is P486042 , its life is 5 years and scrap value is P9050 . Find the cost of depreciation after the first year using a constant percentage method.

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