Sunland Company is considering the replacement of a piece of equipment with a newer model. The following data has been collected Purchase price Accumulated depreciation Annual operating costs Old Equipment $235000 115000 311000 O $389000 O $54000 O $120000 O $240000 New Equiment $389000 -0. 240000 If the old equipment is replaced now, it can be sold for $54000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years. Both assets have a $0 end-of-life salvage value Which of the following amounts is irrelevant to the replacement decision?
Sunland Company is considering the replacement of a piece of equipment with a newer model. The following data has been collected Purchase price Accumulated depreciation Annual operating costs Old Equipment $235000 115000 311000 O $389000 O $54000 O $120000 O $240000 New Equiment $389000 -0. 240000 If the old equipment is replaced now, it can be sold for $54000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years. Both assets have a $0 end-of-life salvage value Which of the following amounts is irrelevant to the replacement decision?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Sunland Company is considering the replacement of a piece of equipment with a newer model. The following data has been collected:
Purchase price
Accumulated depreciation
Annual operating costs
O $389000
O $54000
O $120000
O $240000
Old Equipment
$235000
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An opportunity cost
115000
If the old equipment is replaced now, it can be sold for $54000. Both the old equipment's remaining useful life and the new
equipment's useful life is 5 years. Both assets have a $0 end-of-life salvage value,
Which of the following amounts is irrelevant to the replacement decision?
311000
New Equipment
$389000
-0-
240000
O is the cost of a new product proposal.
O should be initially recorded as an asset.
O lost potential benefit that could have been obtained by following an alternative course of action.
O is classified as manufacturing overhead.
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