Granfield Company has a piece of manufacturing equipment with a book value of $41500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value Granfield can purchase new equipment for $129.000 and receive $23,200 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $42.000 per year. The new equipment will reduce variable manufacturing costs by $20.500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is Mutiple Choice $700 dece $42.000 $56.050 $23300 $23.800 dece

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Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.