Vaughn Manufacturing is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price $220500 $367500 Accumulated depreciation 88200 - 0 - Annual operating costs 294000 235200 If the old equipment is replaced now, it can be sold for $58800. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets. For the 5-year period, what is the increase or decrease in net income associated with the new equipment? $88200` $58800 $(14700) $(73500)
Vaughn Manufacturing is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price $220500 $367500 Accumulated depreciation 88200 - 0 - Annual operating costs 294000 235200 If the old equipment is replaced now, it can be sold for $58800. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets. For the 5-year period, what is the increase or decrease in net income associated with the new equipment? $88200` $58800 $(14700) $(73500)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vaughn Manufacturing is considering the replacement of a piece of equipment with a newer model. The following data has been collected:
| Old Equipment | New Equipment | ||
| Purchase price | $220500 | $367500 | |
| 88200 | - 0 - | ||
| Annual operating costs | 294000 | 235200 |
If the old equipment is replaced now, it can be sold for $58800. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets.
For the 5-year period, what is the increase or decrease in net income associated with the new equipment?
$88200`
$58800
$(14700)
$(73500)
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