Disposal of assets.
Answer the following questions.
1. A company has an inventory of 1,250 assorted parts for a line of missiles that has been discontinued. The inventory cost is 76,000. The parts can be either (a) remachined at total additional costs of 26,500 and then sold for 33,500 or (b) sold as scrap for 2,500. Which action is more profitable? Show your calculations.
2. A truck, costing 100,500 and uninsured, is wrecked its first day in use. It can be either (a) disposed of for 18,000 cash and replaced with a similar truck costing 103,000 or (b) rebuilt for 88,500 and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations.
Question 2
In the fundamental accounting equation, assets are added to liabilities.
Indicate whether the statement is true or false
