Missoula Office Services is considering the purchase of a new server to replace the one in operation. Data on the new server are as follows:
If the existing server is kept and used, it would require the purchase of additional hardware a year from now
costing $2,000. After the use of the server for five years, the salvage value would be $300. Additional information on the existing system is as follows:
The company uses the straight-line method of depreciation with no mid-year convention.
Required:
Should the new server be purchased? Why or why not?

Question

Missoula Office Services is considering the purchase of a new server to replace the one in operation. Data on the new server are as follows:
  If the existing server is kept and used, it would require the purchase of additional hardware a year from now
costing $2,000. After the use of the server for five years, the salvage value would be $300. Additional information on the existing system is as follows:
  The company uses the straight-line method of depreciation with no mid-year convention.
Required:
Should the new server be purchased? Why or why not?

Quizplus · Accepted Answer

The Answer of Missoula Office Services is considering the purchase of a new server to replace the one in operation. Data on the new server are as follows:
  If the existing server is kept and used, it would require the purchase of additional hardware a year from now
costing $2,000. After the use of the server for five years, the salvage value would be $300. Additional information on the existing system is as follows:
  The company uses the straight-line method of depreciation with no mid-year convention.
Required:
Should the new server be purchased? Why or why not?

Missoula Office Services Is Considering the Purchase of a New