Bristol-Myers-Squibb purchased a tablet-forming machine in 2010 for $750,000. The company planned to use the machine for 10 years and then sell it for $50,000; however, due to rapid obsolescence, it will be retired after only 6 years in 2016. (a) Determine the capital investment remaining when the asset was prematurely retired. (b) If the asset is sold at the end of 6 years for $175,000, determine the capital investment loss based on straight line depreciation. (c) If the new-technology machine has an estimated cost of $260,000, how many more years would the company have had to depreciate the currently-owned machine to make its book value and the first cost of the new machine equal each other?
Bristol-Myers-Squibb purchased a tablet-forming
machine in 2010 for $750,000. The company
planned to use the machine for 10 years and
then sell it for $50,000; however, due to rapid obsolescence, it will be retired after only 6 years
in 2016.
(a) Determine the capital investment remaining
when the asset was prematurely retired.
(b) If the asset is sold at the end of 6 years for
$175,000, determine the capital investment
loss based on straight line depreciation.
(c) If the new-technology machine has an estimated
cost of $260,000, how many more
years would the company have had to
the currently-owned machine to make
its book value and the first cost of the new
machine equal each other?
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