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

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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