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Q6: Salalah Mills Ltd. purchases machinery which costs RO 20,000. The useful life of the machine is 9 years and the annual rate of depreciation

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Q6: Salalah Mills Ltd. purchases machinery which costs RO 20,000. The useful life of the machine is 9 years and the annual rate of depreciation is 6% per annum, depreciation being calculated on WDV method. After 9 years, the existing machine has to be replaced by a new one which will cost 250% more than the book value of the existing machine at that time. a) If company sells existing machine at scrap value, What is the extra amount the company will require at the end of 9th year to replace the existing machine by a new one? b) Do you agree with company's decision to sell the existing machine after 9 years and buy new one. Give reasons to your

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