If Flowers For Everyone replaces the existing delivery van with the new one, over the next 10 years operating income will

ACCOUNTING

Multiple Choice

Flowers For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:

Existing van New van

Original cost $100,000 $180,000

Annual operating cost $ 35,000 $ 20,000

Accumulated depreciation $ 60,000 ---

Current salvage value of the existing van $ 45,000 ---

Remaining life 10 years 10 years

Salvage value in 10 years $ 0 $ 0

Annual depreciation $ 4,000 $ 18,000



If Flowers For Everyone replaces the existing delivery van with the new one, over the next 10 years operating income will

a. decrease by $180,000.

b. increase by $150,000.

c. decrease by $150,000.

d. none of the above.


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