Exercise 6-17A (Algo) Asset replacement-opportunity cost LO 6-5 Thornton Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $27,000, and its expected remaining useful life is five years. Thornton has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,000 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 $18,000. Required Calculate the total relevant costs. Should Thornton replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Answer is not complete. Keep Old Total relevant costs Should Thornton replace or continue the old truck? Return to question Replace With New Replace the old truck.

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Chapter1: Financial Statements And Business Decisions
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Exercise 6-17A (Algo) Asset
replacement-opportunity cost LO 6-5
Thornton Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $27,000, and its expected remaining
useful life is five years. Thornton has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel
cost for the old truck is expected to be $5,000 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 $18,000.
Required
Calculate the total relevant costs. Should Thornton replace the old truck with the new fuel-efficient model, or should it continue to use
the old truck until it wears out?
Answer is not complete.
Keep Old
Total relevant costs
Should Thornton replace or continue the old truck?
Return to question
Replace With
New
Replace the old truck.
Transcribed Image Text:Exercise 6-17A (Algo) Asset replacement-opportunity cost LO 6-5 Thornton Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $27,000, and its expected remaining useful life is five years. Thornton has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,000 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 $18,000. Required Calculate the total relevant costs. Should Thornton replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Answer is not complete. Keep Old Total relevant costs Should Thornton replace or continue the old truck? Return to question Replace With New Replace the old truck.
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