The book value of a machine, as shown on the balance sheet, is relevant in a decision concerning the replacement of that machine by another machine

Question

Quizplus · Accepted Answer

The book value of a machine is a historical cost minus accumulated depreciation and does not reflect the current market value or the economic value that the machine may provide in the future. Decision-making regarding replacement should consider the relevant costs and benefits, including the potential increase in efficiency, cost savings, and the current market value of both machines, rather than the historical book value.

The Book Value of a Machine, as Shown on the Balance