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
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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
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