Asked by
Brian Klesch
on Dec 01, 2024
Verified
iSooky has a spotter truck with a book value of $40,000 and a remaining useful life of five years.At the end of the five years the spotter truck will have a zero salvage value.The market value of the spotter truck is currently $32,000.iSooky can purchase a new spotter truck for $120,000 and receive $31,000 in return for trading in its old spotter truck.The new spotter truck will reduce variable manufacturing costs by $25,000 per year over the five-year life of the new spotter truck.The costs not relevant to the decision of whether or not to replace the spotter truck are:
A) $31,000.
B) $25,000.
C) $125,000.
D) $120,000.
E) $40,000.
Book Value
Book value is the net value of a company's assets as reported on the balance sheet, calculated by subtracting liabilities from the total assets.
Salvage Value
The estimated residual value of an asset at the end of its useful life, used in calculating depreciation.
Market Value
Market value is the price at which an asset would trade in a competitive auction setting, reflecting what a buyer is willing to pay.
- Understand key financial factors, such as costs and revenues, in equipment replacement decisions.
Verified Answer
WB
Learning Objectives
- Understand key financial factors, such as costs and revenues, in equipment replacement decisions.