Chapter+10continueingcase[1] - Chapter 10 Accounting in...

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Chapter 10 Accounting in Action: CM 2 CM 2 is considering a significant equipment replacement. Conner and Martin believe that the best time for this equipment replacement is at the end of 2010 . However, they are concerned about the effects this replacement might have on their financial statements. The equipment originally cost $440,000 and after depreciation expense is recorded in 2010, the equipment’s accumulated depreciation balance will be $390,000. At this point the equipment will be fully depreciated to its salvage value. Conner, Martin, Knepp, and Lopez tell you that they have thought of four options regarding the replacement of the old equipment. They could (1) construct the new equipment themselves and then sell the old equipment, (2) exchange the old equipment for new equipment that is more efficient, (3) purchase new equipment and sell the old equipment, or (4) overhaul the old equipment. When you heard this, you wondered about the current employees and whether acquiring new equipment will result in shifting jobs within the business and possibly lead to some layoffs. Because you are not sure how Conner and Martin will react to this concern, you decide not to bring up the subject at this time. Conner and Martin appear increasingly confident in your analysis skills, and they
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This note was uploaded on 11/29/2010 for the course ACC 331 taught by Professor Dr.lee during the Fall '10 term at Jefferson College.

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Chapter+10continueingcase[1] - Chapter 10 Accounting in...

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