Kinder Enterprises relies heavily on a copier machine to process its paperwork. Recently the copy clerk has not been able to pro
cess all the necessary copies within the regular work week. Management is considering updating the copier machine with a faster model. Current Copier New Model Original purchase cost $10,000 $20,000 Accumulated depreciation 8,000 — Estimated operating costs (annual) 7,000 2,600 Useful life 5 years 5 years If sold now, the current copier would have a salvage value of $1,000. 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.
1 answer:
Answer:
Operating costs = $7,000 x 5 years = $35,000
Operating costs = $2,600 x 5 years = $13,000
Explanation:
Operating costs = $7,000 x 5 years = $35,000
Operating costs = $2,600 x 5 years = $13,000
The current copier should be replaced. The incremental analysis shows that net income for the five-year period will be $3,000 higher by replacing the current copier.
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Answer:
cash 96,535 debit
discount on BP 3,465 debit
Bonds Payable 100,000 credit
Explanation:
We need to determinate the price at which the bonds were issued:
Which is the present value of the coupon payment and maturity
Coupon payment: 100,000 x 10% / 2 = 5,000
time 4 (2 years x 2 payment per year)
rate 0.06 (12% annual / 2 = 6% semiannual)
PV $17,325.5281
Maturity (face value) $100,000.00
time 4.00
rate 0.06
PV 79,209.37
PV c $17,325.5281
PV m $79,209.3663
Total $96,534.8944
As the bonds are issued below face value there is a discount:
100,000 - 96,535 = 3,465
the entry will recognize the cash procceds and the creation of a liaiblity
we will also use an auxiliar account for the discount on the bonds