Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so

good that

it takes an extra 3 hours per night, plus every third Saturday, to keep up with the

volume of sales invoices. Management is considering updating its computer with a faster model

that would eliminate all of the overtime processing.

Current Machine

New Ma

chine

Original purchase cost

$15,000

$25,000

Accumulated depreciation

$

6,000

Estimated annual operating costs

$25,000

$20,000

Remaining useful life

5 years

5 years

If sold now, the current machine would have a salvage value of $6,000. If operated for the

remainder of its useful life, the current machine would have zero salvage value. The new

machine is expected to have zero salvage value after 5 years.

Instructions

Should the current machine be replaced?