A company bought production equipment 2 years ago for 45,000. The equipment was

Question

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 6000 at the end of its useful life. The equipment did not perform satisfactorily and the company spent 15000 A year ago to upgrade. it is recommended by the plant engineer that the equipment be either upgraded now for 15000 , or replaced with equipment now. if the equipment is replaced now it can be sold for 10000. in conducting a replacement analysis the cost of the defender to be used is equal to.
A)45000
B)10000
C)21000
D)15000

Explanation / Answer

This equipment can be sold for 10000 after 2 years period which signifies the cost of defender is actually 10000

hence the option B is correct here

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