Asset replacement decision Lange Company paid $60,000 to purchase a machine on January 1, 2007. During 2009,

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Asset replacement decision Lange Company paid $60,000 to purchase a machine on January 1, 2007. During 2009, a technological breakthrough resulted in the development of a new machine that costs $112,500. The old machine costs $36,000 per year to operate, but the new machine could be operated for only $9,000 per year.

The new machine, which will be available for delivery on January 1, 2010, has an expected useful life of four years. The old machine is more durable and is expected to have a remaining useful life of four years. The current market value of the old machine is $10,000. The expected salvage value of both machines is zero.

Required Based on this information, recommend whether to replace the machine. Support your recommendation with appropriate computations.

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Fundamental Managerial Accounting Concepts

ISBN: 9780073526799

4th Edition

Authors: Thomas Edmonds, Bor-Yi Tsay, Philip Olds

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