Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Old Equipment Cost Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs (a) $80,640 $40,600 8 years $10,400 $0 $35,100 New Equipment Cash payback period Cost Estimated useful life Salvage value in 8 years Annual cash operating costs Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. $39.000 8 years $4,600 $29.900 Determine the cash payback period. (Ignore income taxes.) (Round answer to 3 decimal places, e.g. 15.275) years
Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Old Equipment Cost Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs (a) $80,640 $40,600 8 years $10,400 $0 $35,100 New Equipment Cash payback period Cost Estimated useful life Salvage value in 8 years Annual cash operating costs Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. $39.000 8 years $4,600 $29.900 Determine the cash payback period. (Ignore income taxes.) (Round answer to 3 decimal places, e.g. 15.275) years
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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.
Topic Video
Question
Please do not give solution in image format thanku
Transcribed Image Text:Shamrock Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The
following information has been collected on this investment:
Old Equipment
Cost
Accumulated depreciation
Remaining life
Current salvage value
Salvage value in 8 years
Annual cash operating costs
(a)
$80,640
$40,600
8 years
$10,400
$0
$35,100
New Equipment
Cash payback period
Cost
Estimated useful life
Salvage value in 8 years
Annual cash operating costs
Depreciation is $10,080 per year for the old equipment. The straight-line depreciation method would be used for the new equipment
over an eight-year period with salvage value of $4,600.
$39,000
8 years
$4,600
$29,900
Determine the cash payback period. (Ignore income taxes.) (Round answer to 3 decimal places, e.g. 15.275.)
years.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education