19. Keating Co. is considering disposing of equipment that cost $60,000 and has $42,000 of accumulated...

19.

Keating Co. is considering disposing of equipment that cost $60,000 and has $42,000 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $29,000 less a 5% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,000. Keating will incur repair, insurance, and property tax expenses estimated at $12,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a

a.$12,675 profit

b.$5,915 loss

c.$10,140 profit

d.$8,450 loss

20.

Mighty Safe Fire Alarm is currently buying 62,000 motherboards from MotherBoard, Inc., at a price of $67 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $28 per unit; direct labor, $12 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $73,000. Which option should be selected and why?

a.make, $732,840 increase in profits

b.buy, $732,840 increase in profits

c.make, $806,000 increase in profits

d.buy, $73,000 increase in profits

Solutions

Expert Solution

Comment below if you have any query i will solve it asap !! thanks

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

1.6 Keating Co. is considering disposing of equipment with a cost of $63,000 and accumulated depreciation...

1.6 Keating Co. is considering disposing of equipment with a cost of $63,000 and accumulated depreciation of $44,100. Keating Co. can sell the equipment through a broker for $30,000, less a 10% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $47,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net...

Equipment that cost $594000 and has accumulated depreciation of $270000 is exchanged for equipment with a...

Equipment that cost $594000 and has accumulated depreciation of $270000 is exchanged for equipment with a fair value of $432000 and $108000 cash is received. The exchange lacked commercial substance. The new equipment should be recorded at: *Please show all work** The answer is $259,200 but not sure how to get it

Equipment that cost $398,100 and has accumulated depreciation of $318,900 is exchanged for equipment with a...

Equipment that cost $398,100 and has accumulated depreciation of $318,900 is exchanged for equipment with a fair value of $160,000 and $40,000 cash is received. The exchange lacked commercial substance. (a) Calculate the gain to be recognized from the exchange. Gain recognized $

Q1: Starling Co. is considering disposing of a machine with a book value of $23,900 and...

Q1: Starling Co. is considering disposing of a machine with a book value of $23,900 and estimated remaining life of five years. The old machine can be sold for $5,800. A new high-speed machine can be purchased at a cost of 73,200. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $23,200 to $20,500 if the new machine is purchased. The differential effect...

Quincy Quarry is considering buying new equipment. The equipment would cost $60,000, which would be depreciated...

Quincy Quarry is considering buying new equipment. The equipment would cost $60,000, which would be depreciated using MACRS 5-year method over the project’s life of 6 years, and would have a $5,000 salvage value. The anticipated income from the project is $29,000 on the first year. Afterwards, it grows at 3% per year. The cost of goods sold is $8,800, which grows at 5% per year afterwards. The fixed cost is $2,200. The project will require a net working capital...

Smith Co. sold equipment that had cost $8,000 and had accumulated depreciation of $6,700. The sale...

Smith Co. sold equipment that had cost $8,000 and had accumulated depreciation of $6,700. The sale price for the equipment was $2,000. The entry to record the sale will include a a. debit to Equipment for $8,000 b. credit to Accumulated Depreciation, Equipment, for $6,700 c. credit to Cash for $2,000 d. credit to Gain on Sale of Equipment for $700 Assuming that inventory costs have been rising throughout the period, use of the LIFO inventory method will produce a...

41. Smith Co. sold equipment that had cost $8,000 and had accumulated depreciation of $6,700. The...

41. Smith Co. sold equipment that had cost $8,000 and had accumulated depreciation of $6,700. The sale price for the equipment was $2,000. The entry to record the sale will include a a. debit to Equipment for $8,000 b. credit to Accumulated Depreciation, Equipment, for $6,700 c. credit to Cash for $2,000 d. credit to Gain on Sale of Equipment for $700 42. Kinder Co. purchased a car for $25,000, with an estimated useful life of 5 years and a...

A firm is considering investing $42,000 in equipment that is expected to have a useful life...

A firm is considering investing $42,000 in equipment that is expected to have a useful life of four years and is expected to reduce (save) the firm’s labor costs by $8,900 per year. The equipment can be sold for $18,000 at the end of the period. Assume the firm pays a 40% income tax rate on its taxable income and uses the declining balance (200%) depreciation method. The firm’s after tax MARR is 5% per year. What are the after-tax...

Orange Company is considering the purchase of some equipment. The initial investment will be $42,000. The...

Orange Company is considering the purchase of some equipment. The initial investment will be $42,000. The estimated useful life of the equipment will be 5 years, at which point it will have a zero salvage value. The annual savings in cash operating costs will equal $12,500, and the company has a minimum required rate of return of 12 percent. Use straight-line depreciation, and ignore income taxes. Compute (Show all calculations): Net present value Internal rate of return Payback period Accounting...

11. Warren has equipment with cost of $22,000 and accumulated depreciation of $16,000. If Warren sells...

11. Warren has equipment with cost of $22,000 and accumulated depreciation of $16,000. If Warren sells the equipment for $7,000, what is the gain or loss? A. gain of $7,000 b. loss of $1,000 c. gain of $13,000 d. gain of $1,000 12.How are partners compensated in a partnership? A. each partner receives a cash payment on 12/31 b. each partner gets a salary paid in cash c. each partner's capital receives a portion of the net income or loss...

Subjects