Question
Smith and Sons Company is considering a new drilling machine for its production plant to replace an old drilling machine that originally cost $9,000 and
Smith and Sons Company is considering a new drilling machine for its production plant to replace an old drilling machine that originally cost $9,000 and has $6,300 of accumulated depreciation. The new machine can be purchased at a cash cost of $14,400, but the distributor of the new drilling machine has offered to take the old machine in as a trade-in, thereby reducing the cost of the new machine to $12,600. Based only on this information, calculate the total relevant cost of acquiring the new machine.
Select one:
a. $14,400 , or the gross cost of the new machine minus the $900 loss on disposing of the old machine
b. $12,600 , or the net cash paid to the distributor
c. $12,600 , or the net cash paid plus the book value ( $2,700 ) of the old machine
d. $14,400 , or the gross cost of the new machine
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