Question

Wilbert’s, Inc. paid $90,000, in cash, for a piece of equipment three years ago. Last year, the company spent $10,000 to update the equipment with the latest technology. The company no longer uses this equipment in its current operations and has received an offer of $50,000 from a firm who would like to purchase it. Wilbert’s is debating whether to sell the equipment or to expand its operations such that the equipment can be used. When evaluating the expansion option, what value, if any, should Wilbert’s assign to this equipment as an initial cost of the project?a.$40,000b.$50,000c.$60,000d.$80,000e.$90,000

Answer 1

b.$50,000

Step-by-step explanation:

The paid $90,000 and additional $10,000 spent on this equipment is the cost of this equipment, but maybe have been amortized fully in current project already; so we do not need to indicate these amount in the new project.

The company has received an offer of $50,000 for selling this piece of equipment, thus this is an opportunity cost of the project.

And the company should assign this as an initial cost of the project.