Plastic Copper Capital investment Useful (class) life Salvage value for depreciation purposes $1,000(- SVs) $5.000(-SV10) Annual expenses Market value at end of useful life $5,000 $10,000 5 years 10 years $300 $100 SO

Plastic Copper Capital investment Useful (class) life Salvage value for depreciation purposes $1,000(- SVs) $5.000(-SV10) Annual expenses Market value at end of useful life $5,000 $10,000 5 years 10 years $300 $100 SO

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

In a chlorine-fluxing installation in a large aluminum company, engineers are
considering the replacement of existing plastic pipe fittings with more expensive, but longer lived, copper fittings. The following table gives a comparison of the capital investments, lives, salvage values, and so on of the two mutually exclusive alternatives under consideration: Depreciation amounts are calculated with the SL method. Assume an income tax rate of 40% and a MARR after-taxes of 12% per year. Which pipe fitting would you select and why? Carefully list all assumptions that you make in performing the analysis.

Plastic
Copper
Capital investment
Useful (class) life
Salvage value for depreciation purposes S1,000(3SV5) $5.000(-SV10)
Annual expenses
Market value at end of useful life
$5,000
$10,000
10 years
5 years
%3D
24300
SO
24100

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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