Waterway Industries 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 $352000 $576000 Accumulated 140800 -0- depreciation Annual operating 463000 398000 costs If the old equipment is replaced now, it can be sold for $95800. 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. The net advantage (disadvantage) (net effect on current year net income) of replacing the old equipment with the new equipment is (don't consider annual operating costs in the computation) $(111000) $140800 $95800 $(19400)
Waterway Industries 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 $352000 $576000 Accumulated 140800 -0- depreciation Annual operating 463000 398000 costs If the old equipment is replaced now, it can be sold for $95800. 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. The net advantage (disadvantage) (net effect on current year net income) of replacing the old equipment with the new equipment is (don't consider annual operating costs in the computation) $(111000) $140800 $95800 $(19400)
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Waterway Industries 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
$352000
$576000
Accumulated
140800
-0-
depreciation
Annual operating
costs
463000
398000
If the old equipment is replaced now, it can be sold for $95800. 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.
The net advantage (disadvantage) (net effect on current year net income) of replacing the old equipment with the new equipment is
(don't consider annual operating costs in the computation)
$(111000)
$140800
$95800
$(19400)
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