In an equipment replacement decision the cost of the old equipment is an a

In an equipment replacement decision the cost of the

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133.In an equipment replacement decision, the cost of the old equipment is a(n) a.incremental cost.b.sunk cost.c.relevant cost.d.opportunity cost. Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics 134.Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected:Old EquipmentNew EquipmentPurchase price$225,000$375,000Accumulated depreciation90,000- 0 -Annual operating costs300,000240,000If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.Which of the following amounts is irrelevant to the replacement decision? Ans: B, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics 135.Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected:Old EquipmentNew EquipmentPurchase price$225,000$375,000Accumulated depreciation90,000- 0 -Annual operating costs300,000240,000If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.What is the net cost of the new equipment? 21 - 31
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Test Bank for Financial and Managerial Accounting 136.Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected:Old EquipmentNew EquipmentPurchase price$225,000$375,000Accumulated depreciation90,000- 0 -Annual operating costs300,000240,000If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.The net advantage (disadvantage) of replacing the old equipment with the new equipment is Ans: B, LO: 6, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics 137.Which of the following is relevant information in a decision whether old equipment presently being used should be replaced by new equipment? a.The cost of the old equipmentb.The salvage value of the old equipmentc.The book value of the old equipmentd.The accumulated depreciation of the old equipment Ans: B, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Business Economics
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