Gull Corp Is Considering Selling Its Old Popcorn Machine and Replacing

question 27

Essay

Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000 and its remaining useful life is 5 years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 and annual operating costs would be $1,500. The new machine has an estimated useful life of 5 years. Should the machine be replaced? Support your answer with calculations.

---

Definitions:

Fixed Maturity Date

The predetermined date on which a financial instrument, such as a bond, loan, or investment, is due to be repaid or mature.

Ownership

The legal right to possess, use, and dispose of anything of value, including tangible and intangible assets.

Held-to-maturity Securities

Debt securities that a company has the intent and ability to hold until they mature, not to be sold beforehand.

Debt Investments

Investments made through the purchase of bonds, notes, or other financial instruments that obligate the issuer to pay the investor fixed or variable interest payments and to repay the principal at maturity.