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9) Gray Lake Company is considering the replacement of a machine that is presently used in…

by | Sep 9, 2023 | accounting

9) Gray Lake Company is considering the replacement of a machine that is presently used in production. The following data are available:

Old Machine         New Machine

Original cost$57,000$35,000

Useful life in years175

Current age in years120

Book value$39,000-

Disposal value now$8,000-

Disposal value in 5 years00

Annual cash operating costs$7,000$4,000

Adding all five years together, the total relevant costs to consider if the old machine is not replaced is ________.

A) $22,000

B) $31,000

C) $35,000

D) $39,000

10) Inverness Company is considering the replacement of a machine that is presently used in production. The following data are available:

Old Machine         New Machine

Original cost$57,000$35,000

Useful life in years175

Current age in years120

Book value$39,000-

Disposal value now$8,000-

Disposal value in 5 years00

Annual cash operating costs$7,000$4,000

Adding all five years together, what is the difference in total relevant costs between the old machine and the new machine?

A) $12,000

B) $15,000

C) $22,000

D) $37,000

11) Amanda Company is considering the replacement of a machine that is presently used in production. The following data are available:

Old Machine         New Machine

Original cost$200,000$160,000

Useful life in years105

Current age in years50

Book value$100,000-

Disposal value now$32,000-

Disposal value in 5 years00

Annual cash operating costs$20,000$14,000

Adding all five years together, the total relevant costs to consider if the new machine is purchased is ________.

A) $70,000

B) $100,000

C) $198,000

D) $230,000

12) Park Ridge Company is considering the replacement of a machine that is presently used in production. The following data are available:

Old Machine         New Machine

Original cost$200,000$160,000

Useful life in years105

Current age in years50

Book value$100,000-

Disposal value now$32,000-

Disposal value in 5 years00

Annual cash operating costs$20,000$14,000

Adding all five years together, the total relevant costs to consider if the old machine is kept is ________.

A) $32,000

B) $68,000

C) $80,000

D) $100,000

13) Gurnee Company is considering the replacement of a machine that is presently used in production. The following data are available:

Old Machine         New Machine

Original cost$200,000$160,000

Useful life in years105

Current age in years50

Book value$100,000-

Disposal value now$32,000-

Disposal value in 5 years00

Annual cash operating costs$20,000$14,000

Adding all five years together, what is the difference in total relevant costs between the old and new machines?

A) $12,000

B) $30,000

C) $98,000

D) $130,000

14) The gain or loss on the disposal of equipment is determined by ________.

A) subtracting the book value of the old equipment to the cost of the new equipment

B) subtracting the disposal value of the old equipment to the book value of the old equipment

C) subtracting the book value of the old equipment from the cash received for the old equipment

D) subtracting the book value of the old equipment from the cost of the new equipment

15) Sunbury Company is considering the replacement of a machine that is presently used in production. The following data are available:

Old Machine         New Machine

Original cost$60,000$35,000

Useful life in years105

Current age in years50

Book value$25,000-

Disposal value now$8,000-

Disposal value in 5 years00

Annual cash operating costs$12,000$4,000

Adding all five years together, the total relevant costs to consider if the old machine is kept are ________.

A) $30,000

B) $50,000

C) $52,000

D) $60,000

16) The disposal value of old equipment is relevant in equipment replacement decisions.

17) Sunk cost is used to describe a historical cost or past cost.

18) When making a decision to replace some old equipment with new equipment, the book value of the ol

  

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