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Solomon Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing
Solomon Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. Existing Equipment Historical cost Operating expenses* Salvage value Market value Book value Remaining useful life Replacement Equipment $ 110,000 Market price $ 116,000 110,000 Operating expenses* 114,000 27,000 Salvage value 10,000 50,000 Useful life 6 years 35,000 6 years *The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment. Required Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced? Old New Total cost Should the equipment be replaced?
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