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The current machine, which is being considered for replacement, was purchased on January 1, 2020, for $120,000 with an estimated useful life of 12 years
The current machine, which is being considered for replacement, was purchased on January 1, 2020, for $120,000 with an estimated useful life of 12 years and zero salvage value for financial reporting purposes. The estimated disposal value of this machine on January 1, 2022, is $36,000. If not disposed of (i.e., if not sold outright), it is estimated that the current machine could be used for another 10 years (i.e., the same total number of years as its original estimated useful life). The base purchase price for the replacement machine is $170,000. Delivery cost for the machine, to be born separately by WPC, is estimated as $5,000. Installation and testing costs for the new machine are estimated to be $25,000. In the past, WPC has "charged" each major investment project with an administrative fee equal to 10% of the purchase price of the asset (investment). This imputed fee represents an allocation of corporate headquarters' (i.e., "overhead") expense
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