Acc301 Essentials of Accounting: E7-11 Twyla Enterprises uses a computer

Acc301 Essentials of Accounting

E7-11
Twyla Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.
Current Machine New Machine
Original purchase cost 15,000 25,000
Accumulated depreciation 6,000 -
Estimated annual operating costs 24,000 18,000
Useful life 5 years 5 years
If sold now, the current machine would have a salvage value of $5,000. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after five years.

Instructions
Should the current machine be replaced?
Powered by