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Bike the Bay Tours has a van that is getting old. They are considering replacing the van with a new model. The old model has remaining useful life of 3 years and no salvage value. The new model also has a useful life of 3 years. Annual operating costs of the old model are $5,000 per year and of the new model are $3,000 per year. The new van will cost $10,000.

Bike the Bay Tours has a van that is getting old. They are considering replacing the van with a new model. The old model has remaining useful life of 3 years and no salvage value. The new model also has a useful life of 3 years. Annual operating costs of the old model are $5,000 per year and of the new model are $3,000 per year. The new van will cost $10,000.

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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Bike the Bay Tours has a van that is getting old. They are considering replacing the van with a new model. The old model has remaining useful life of 3 years and no salvage value. The new model also has a useful life of 3 years. Annual operating costs of the old model are $5,000 per year and of the new model are $3,000 per year. The new van will cost $10,000. You may want to consider using a chart like in class to answer this question. Category Retain Replace Impact on Net Income What is the impact on net income if they replace the van? Increase of $15,000 Decrease of $(10,000) Increase of $4,000 Decrease of $(4,000)
Transcribed Image Text:Bike the Bay Tours has a van that is getting old. They are considering replacing the van with a new model. The old model has remaining useful life of 3 years and no salvage value. The new model also has a useful life of 3 years. Annual operating costs of the old model are $5,000 per year and of the new model are $3,000 per year. The new van will cost $10,000. You may want to consider using a chart like in class to answer this question. Category Retain Replace Impact on Net Income What is the impact on net income if they replace the van? Increase of $15,000 Decrease of $(10,000) Increase of $4,000 Decrease of $(4,000)
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