Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of

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Xinhong Company is considering replacing one of its manufacturing machines. The machine has a book value of $ 45,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. It has a current market value of $ 52,000. Variable manufacturing costs are $ 36,000 per year for this machine. Information on two alternative replacement machines follows. Should Xinhong keep or replace its manufacturing machine?

Xinhong Company is considering replacing one of its manufacturing machines.

If the machine should be replaced, which alternative new machine should Xinhongpurchase?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Fundamental accounting principle

ISBN: 978-0078025587

21st edition

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

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