Billings Office Services is considering the purchase of a new computer system to replace the one in operation. Data on the new computer system are:
If the existing computer system is kept and used, it would require the purchase of additional hardware a year from now costing $2,000. After using the system for five years, the salvage value would be $300. Additional information on the existing system is:
The company uses the straight-line method of depreciation.
Required: Should the new system be purchased? Why or why not?

Question

Billings Office Services is considering the purchase of a new computer system to replace the one in operation. Data on the new computer system are:
  If the existing computer system is kept and used, it would require the purchase of additional hardware a year from now costing $2,000. After using the system for five years, the salvage value would be $300. Additional information on the existing system is:
  The company uses the straight-line method of depreciation.
Required: Should the new system be purchased? Why or why not?

Quizplus · Accepted Answer

The Answer of Billings Office Services is considering the purchase of a new computer system to replace the one in operation. Data on the new computer system are:
  If the existing computer system is kept and used, it would require the purchase of additional hardware a year from now costing $2,000. After using the system for five years, the salvage value would be $300. Additional information on the existing system is:
  The company uses the straight-line method of depreciation.
Required: Should the new system be purchased? Why or why not?

Billings Office Services Is Considering the Purchase of a New