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Calculate the net book value of the old packing machine

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Reference no: EM133098486

Question - Coffee Rain Pte Ltd sells vacuum packed coffee bean online since 1 January 2019.

Coffee Rain invested in a coffee bean packing machine on the first day of business.

Coffee Rain policy is to depreciate the packing machine over five years using straight-line method.

Below is the breakdown of the machine.

Items Amount $

Cost of machine $15,000

Installation charges $200

1,000 pieces of vacuum bag for packing the coffee bean $300

Scrap value at the end of 5 years $3,200

On 31 Dec 2021, Lecester Pte Ltd offered to sell Coffee Rain a brand-new coffee bean packing machine at a price $11,000 if Coffee Rain trades in the old machine. The current selling price for the new machine is $18,000.

Required -

a) Calculate the Net Book Value of the old packing machine. Show your workings clearly.

b) Explain if Coffee Rain should accept the trade-in offer or not.

Reference no: EM133098486

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