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Accounting

Chung Inc. 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 $ 75,000 $125,000
Accumulated depreciation 30,000 - 0 -
Annual operating costs 100,000 80,000

If the old equipment is replaced now, it can be sold for $20,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years.

The net advantage (disadvantage) of replacing the old equipment with the new equipment is:

a) $20,000

b) $(5,000)

c) $(25,000)

d) $30,000

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M991709

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