Exercise 13-17A (Algo) Asset replacement decisions-opportunity cost LO 13-5 Jordan Freight Company owns a truck that cost $42.000 Currently, the truck's book value is $22,000, and its expected remaining useful life is five years. Jordan has the opportunity to purchase for $30100 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,600 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $10,000 Required Calculate the total relevant costs. Should Jordan replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Total relevant costs Should Jordan replace or continue the old truck? Keep Old Replace the old truck Replace With New

Exercise 13-17A (Algo) Asset replacement decisions-opportunity cost LO 13-5 Jordan Freight Company owns a truck that cost $42.000 Currently, the truck's book value is $22,000, and its expected remaining useful life is five years. Jordan has the opportunity to purchase for $30100 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,600 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $10,000 Required Calculate the total relevant costs. Should Jordan replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Total relevant costs Should Jordan replace or continue the old truck? Keep Old Replace the old truck Replace With New

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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QUESTION C A local authority's Fire Service is considering replacement of a turntable ladder which although still serviceable, has steeply rising maintenance costs, and it is thought that a replacement will proof less expensive in the long term. The purchase cost of a new turntable ladder will be $360,000 - half payable immediately and half one year from now. The following information is available: - Existing 8 Years 8 years Replacement 8 Years 8 years Estimated useful life Estimated costs: Year 1 40,000 10,000 Year 2 45,000 10,000 Year 3 50,000 14,000 Year 4 60,000 15,000 Year 5 72,000 18,000 Year 6 80,000 18,000 Year 7 90,000 20,000 Year 8 98,000 22,000 Full Overhauls Year 2 5,000 Year 4 10,000 4,000 Year 6 14,000 Estimated Resale Value Now 10,000 Year 8 1,000 maintenance 8,000
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ex2. Differential Analysis for Machine Replacement Proposal Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, eight-year life $38,000 Annual depreciation (straight-line) 4,750 Annual manufacturing costs, excluding depreciation 12,400 Annual nonmanufacturing operating expenses 2,700 Annual revenue 32,400 Current estimated selling price of the machine 12,900 New Machine Cost of machine, six-year life $57,000 Annual depreciation (straight-line) 9,500 Estimated annual manufacturing costs, exclusive of depreciation 3,400 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Required: 1. Prepare a differential analysis as of November 8 comparing…
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