Brixton Textiles is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows: Existing Equipment Cost Operating expenses* Salvage value Market value Book value 4:42 Depreciation Remaining useful life k Replacement Equipment $258,000 Cost $289,000 135,000 Operating expenses 51,100 10,600 Salvage value 174,000 Useful life 10,600 5 years 145,000 125,000 5 years *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Based on this information, should the old machine be replaced? vant costs of operating the new equipment are higher by the old equipment should be kept

Brixton Textiles is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows: Existing Equipment Cost Operating expenses* Salvage value Market value Book value 4:42 Depreciation Remaining useful life k Replacement Equipment $258,000 Cost $289,000 135,000 Operating expenses 51,100 10,600 Salvage value 174,000 Useful life 10,600 5 years 145,000 125,000 5 years *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Based on this information, should the old machine be replaced? vant costs of operating the new equipment are higher by the old equipment should be kept

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets

Section: Chapter Questions

Problem 1AFE

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Finch Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing Equipment Cost Operating expenses* Salvage value Market value Book value Remaining useful life $114,000 113,000 22,000 51,000 31,000 Old 8 years Total cost Should the equipment be replaced? Replacement Equipment $118,000 112,000 11,000 *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Cost Operating expenses. Salvage value Useful life Required Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced? New 8 years
Brixton Textiles is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows: Existing Equipment Cost Operating expenses* Salvage value Market value Book value 4:42 Depreciation Remaining useful life k Replacement Equipment $258,000 Cost $289,000 135,000 Operating expenses 51,100 10,600 Salvage value 174,000 Useful life 10,600 5 years 145,000 125,000 5 years *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Based on this information, should the old machine be replaced? vant costs of operating the new equipment are higher by the old equipment should be kept
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Vernon Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Replacement Equipment. $111,000 Existing Equipment Cost $113,000 Cost Operating expenses* 106,000 Salvage value 28,000 Operating expenses* Salvage value Market value 56,000 Useful life Book value 33,000 Remaining useful life 10 years 106,000 16,000 10 years *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced? Total cost Old New Should the equipment be replaced?
Vernon Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing Equipment Replacement Equipment Cost $ 110,000 Cost $ 114,000 Operating expenses* 105,000 Operating expenses* 112,000 Salvage value 27,000 Salvage value 13,000 Market value 41,000 Useful life 8 years Book value 32,000 Remaining useful life 8 years *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment.RequiredCalculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced?
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Assume that a company is choosing between two alternatives-keep an existing machine or replace it with a new machine. The costs associated with the two alternatives are summarized as follows: Purchase cost (new) Remaining book value Overhaul needed now Existing Machine $ 15,000 $ 6,000 $ 5,000 New Machine $ 22,000 Annual cash operating costs Salvage value (now) Salvage value (eight years from now) $6,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Assuming a discount rate of 13%, what is the net present value of the cash flows associated with keeping the existing machine? $ 10,500 $ 2,000 $1,000 $ 7,000
Sheridan Company is contemplating the replacement of an old machine with a new one. The following information has been gathered: Price Accumulated Depreciation Remaining useful life Useful life: Annual operating costs Old Machine $240000 72000 10 years $192000 New Machine $480000 -0- 10 years $144000 If the old machine is replaced, it can be sold for $19200. The company uses straight-line depreciation with a zero salvage value for all of its assets. Which of the following amounts is relevant to the replacement decision?