Problem 7. Mochit Co. is deciding whether-to purchase a new machine for their operation or to keep using their existing machine. old machinenew machineOriginal cost$22,400$27,500Useful life8 years5 yearsCurrent age 3 years Remaining life5 years5 yearsAccum. Depreciation$8,4000Book value$14,000 Disposal value$5,000 Annual operating cost$10,600$5,400Required:Calculate the difference in total cost over the next 5 years under both alternatives and determine if it is better to keep the existing machine or replace it with the new machine ?

Asset Replacement decision as Investing Decisions are very crucial decisions which require intensive…

Answered: Required: Calculate the difference in…

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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Problem 7.

Mochit Co. is deciding whether-to purchase a new machine for their operation or to keep using their existing machine.

	old machine	new machine
Original cost	$22,400	$27,500
Useful life	8 years	5 years
Current age	3 years
Remaining life	5 years	5 years
Accum. Depreciation	$8,400	0
Book value	$14,000
Disposal value	$5,000
Annual operating cost	$10,600	$5,400

Required:

Calculate the difference in total cost over the next 5 years under both alternatives and determine if it is better to keep the existing machine or replace it with the new machine ?

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