Doey, Cheatem, and Howe, Attorneys, rely heavily on a colour laser printer to process the paperwork. Recently the printer has not functioned well and print jobs were not being processed. Management is considering updating the printer with a faster model.

Current PrinterNew Model

Original purchase cost$30,000$24,000

Accumulated depreciation17,000

Estimated operating costs (annual)3,0002,000

Useful life4 years4 years

If sold now, the current printer would have a salvage value of $4,000. If operated for the remainder of its useful life, the current printer would have zero salvage value. The new printer is expected to have zero salvage value after four years.

Instructions

Prepare, in proper format, an analysis to show whether the company should retain or replace the printer.8 marks