To decide whether Machine A should be retained or replaced by Machine B by computing after tax annual cost.

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Chapter 13, Problem 51P

To determine

To decide whether Machine A should be retained or replaced by Machine B by computing after tax annual cost.

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The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,600 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $9,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,000 per year. The new machine would require that inventories be increased by $2,500, but accounts payable would…

The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,400, and it can be sold for $2,600 at this time. Thus, the annual depreciation expense is $2,400/6 = $400 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $8,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,000 per year. The new machine would require that inventories be increased by $2,500, but accounts payable would…

A surface mount PCB placement/soldering line is to be installed for $1,800,000. It will have a salvage value of $90,000 after 5 year Determine the depreciation deduction and the resulting unrecovered investment during each year of the asset's life. Click here to access the MACRS-GDS Table Calculator Part a Determine the depreciation deduction and the resulting unrecovered investment during each year of the asset's life using straight-line depreciation. ΕΟΥ 0 1 Depreciation 0 1458000 2 1116000 3 4 5 Sum depreciation Balances 1800000 342000 68