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old Equipment New Equipment Original cost $770,000 $871,200 Remaining life 5 years 5 years Accumulated depreciation $347,600 $0 Annual cash operating costs $140,800 $35,200 Current salvage value $193,600 NA Salvage value in five years $0 $0

old Equipment New Equipment Original cost $770,000 $871,200 Remaining life 5 years 5 years Accumulated depreciation $347,600 $0 Annual cash operating costs $140,800 $35,200 Current salvage value $193,600 NA Salvage value in five years $0 $0

FINANCIAL ACCOUNTING
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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Certain production equipment used by Dayton Mechanical has become obsolete relative to current technology. The company is considering whether it should keep or replace its existing equipment. To aid in this decision, the company’s controller gathered the following data: (See attached)

c. What is the total dollar amount of all relevant costs to the equipment replacement decision. $______

d. What is the total dollar amount of the opportunity costs associated with the alternative of keeping the old equipment? $______

old Equipment New Equipment Original cost $770,000 $871,200 Remaining life 5 years 5 years Accumulated depreciation $347,600 $0 Annual cash operating costs $140,800 $35,200 Current salvage value $193,600 NA Salvage value in five years $0 $0
Transcribed Image Text:old Equipment New Equipment Original cost $770,000 $871,200 Remaining life 5 years 5 years Accumulated depreciation $347,600 $0 Annual cash operating costs $140,800 $35,200 Current salvage value $193,600 NA Salvage value in five years $0 $0
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