It is possible to replace a used machine with book value of $380,000 and remaining useful life five years, after which its book value will be zero, although today may sold on the market for $250,000. The alternative machine costs $900,000, life five-year useful life and $150,000 salvage value at the end of that period. will produce savings $250,000 per
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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It is possible to replace a used machine with book value of $380,000 and remaining useful life five years, after which its book value will be zero, although today may sold on the market for $250,000. The alternative machine costs $900,000, life five-year useful life and $150,000 salvage value at the end of that period. will produce savings $250,000 per year. Taxes are paid at 50%, the company's MARR is 11%, and the Equipment is
Reply Accept replacement; $102,753 incremental
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