7. (5 pts) A company bought production equipment 2 years ago for $45,000. The eq

Question

7. (5 pts) A company bought production equipment 2 years ago for $45,000. The equipment was expected to last for 5 years and the salvage value was estimated to be $6,000 at the end of its useful life. The equipment did not perform satisfactorily and the company spent $15,000 a year ago to upgrade. It is recommended by the plant engineer that the equipment be either upgraded now for another $15,000 or replaced with equipment now. If the equipment is replaced now, it can be sold for S10,000. In conducting a replacement analysis, the cost of the defender to be used is equal to: (5 pts) (A) $45,000 (B) S10,000 (C) $21,000 (D) $15,000

Explanation / Answer

The cost of the defender to be used is the current price obtained by selling it;$10000 Therefore, Answer is B)$10,000

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