Consider the following data: OLD PROPOSED NEW EQUIPMENT EQUIPMENT Original cost Useful life, in years Current age,
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Consider the following data:
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OLD PROPOSED NEW EQUIPMENT EQUIPMENT Original cost Useful life, in years Current age, in years Useful life remaining, in years $24,000 $12,000 8 3 5 0 3 3 Accumulated amortization 15,000 0 Book value 9,000 Not acquired yet Disposal value (in cash) now 3,000 Not acquired yet Annual cash operating costs (maintenance, power, repairs, lubricants, etc.) $10,000 $ 6,000 1. Prepare a cost comparison of all relevant items for the next three years together. Ignore taxes. 2. Prepare a cost comparison that includes both relevant and irrelevant items. 3. Prepare a comparative statement of the total charges against revenue for the first year. Would the manager be inclined to buy the new equip- ment? Explain.
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Related Book For
Management Accounting
ISBN: 9780367506896
5th Canadian Edition
Authors: Charles T Horngren, Gary L Sundem, William O Stratton, Howard D Teall, George Gekas
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