Company is considering the replacement of equipment used in, Ask an Expert

Accounting

Company is considering the replacement of equipment used in operations. The following data are available:

Old Equipment New Equipment

Original cost $93,000 $60,000

Useful life in years 13 6

Current age in years 7 0

Book value $57,000 -

Disposal value now $50,000 -

Disposal value in 6 years 0 0

Annual cash operating costs $14,000 $11,000

Required:

A) Prepare a cost comparison for replacing the old equipment. Use only relevant items and add the items together for the next 6 years.

B) Should the old equipment be replaced?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9799906

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