Answer :
Cash inflows related to the new equipment acquisition should include $7,500 in the eighth year, according to Durham.
Explain about the equipment purchase?
Associated with buying equipment The term "Purchased Equipment" refers to any tangible items that Customer purchases in accordance with this Agreement, including any replacements that may be offered to Customer. Any internal software required to operate the purchased equipment is additionally provided.
An asset that is fixed or non-current is equipment. This indicates that it cannot be quickly liquidated and won't be sold within the upcoming accounting year. Purchasing long-term assets might be beneficial, in addition to having current assets that allow your company easy access to cash.
Equipment purchases are not recorded as an expense in a single year but rather over the course of the equipment's life. Depreciation is the term for this.
The complete question is,
Durham Electric Motors is thinking about replacing a piece of machinery that, if not replaced right now, will need extensive repair and overhaul that will cost $57,000 in three years. Eight years are left in the useful life of the current equipment, and eight years will likewise be the remaining life of the new equipment. If the current equipment is not replaced right away, it will eventually have a salvage value of $7,500. Durham should examine the cash flows related to the new equipment purchase.
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