The difference between keeping the old machine and replacing the old machine is

ACCOUNTING

Multiple Choice

Frederick, Inc., is considering replacing a machine. The following data are available:



Replacement

Old Machine Machine

Original cost $45,000 $35,000

Useful life in years 10 5

Current age in years 5 0

Book value $25,000 ‑

Disposal value now $8,000 ‑

Disposal value in 5 years 0 0

Annual cash operating costs $7,000 $4,000



The difference between keeping the old machine and replacing the old machine is

a. $37,000 in favor of keeping the old machine.

b. $12,000 in favor of keeping the old machine.

c. $37,000 in favor of replacing the old machine.

d. $12,000 in favor of replacing the old machine.


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