Eaton Inc. purchases the following used items at an auction for $88,000 cash: a drill press, a lathe, and an air compressor. The equipment is in excellent condition except for the motor on the lathe, whichwill cost $1,980 to replace with a new motor. The company determines that selling prices for the used items are as follows: drill press, $18,480; lathe with the new motor, $52,800; and air compressor,$23,100. Prepare the entry to record (a) acquisition of

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Answered: Eaton Inc. purchases the following used…

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 Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have depreciation expenses of $650 for 5 years and $325 for the sixth year. Its current book value is $3,575, and it can be sold on an Internet auction site for $4,150 at this time. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life. Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $12,000, and has an estimated useful life of 6 years with an estimated salvage value of $1,200. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52 %, 11.52%, and 5.76%. The new steamer is faster and would allow for an output expansion, so sales would rise by $2,000 per year; even so, the new machine's much greater efficiency would reduce operating expenses by $1,600 per year.…

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