Asset replacement decision Adam Company is considering the replacement of some o

Question

Asset replacement decision Adam Company is considering the replacement of some of its manufacturing equipment. Infor. mation regarding the existing equipment and the potential replacement equipment follows Existing Equipment Replacement Equipment Cost Operating expenses Salvage value Market value Book value Remaining useful life The amounts shown for operating expenses are the cumulative total of all such expected expenses to be Incurred over the useful life of the equipment $125,000 80,000 20,000 8 years $150,000Cost 120,000 Operating expenses 20,000 Salvage value 0,000 Useful life 5,000 8 years Required Based on this information, recommend whether to replace the equipment. Support your recom- mendation with appropriate computations

Explanation / Answer

Additional cost to be incured on Replacement 65000 (125000-60000) Cost saved on operating expenses 40000 (120000-80000) Net Saving -25000 Hence, existig machine should not be replaced

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.