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Thornton Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing Equipment Cost Operating expenses* Salvage value Market value Book value Remaining useful life $112,000 112,000 27,000 54,000 33,000 Old 9 years Total cost Should the equipment be replaced? *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced? Replacement Equipment $112,000 110,000 18,000 9 years New Cost Operating expenses* Salvage value Useful life No

Thornton Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing Equipment Cost Operating expenses* Salvage value Market value Book value Remaining useful life $112,000 112,000 27,000 54,000 33,000 Old 9 years Total cost Should the equipment be replaced? *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced? Replacement Equipment $112,000 110,000 18,000 9 years New Cost Operating expenses* Salvage value Useful life No

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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Thornton Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing Equipment Cost Operating expenses* Salvage value Market value Book value Remaining useful life $112,000 112,000 27,000 54,000 33,000 Old 9 years Total cost Should the equipment be replaced? *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced? Replacement Equipment $112,000 110,000 18,000 9 years New Cost Operating expenses* Salvage value Useful life No
Transcribed Image Text:Thornton Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing Equipment Cost Operating expenses* Salvage value Market value Book value Remaining useful life $112,000 112,000 27,000 54,000 33,000 Old 9 years Total cost Should the equipment be replaced? *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced? Replacement Equipment $112,000 110,000 18,000 9 years New Cost Operating expenses* Salvage value Useful life No
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