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One of the employees of Davenport Corporation recently was involved in an accident with one of the corporation's delivery vans. The corporation is either going to repair the damaged van or sell it as is and buy a comparable used van. Information related to this decision is provided below:

Initial cost of the damaged van $ 30,000
Accumulated depreciation to date on van $ 18,000
Salvage value of van immediately before crash $ 9,000
Salvage value of van immediately after crash $ 1,000
Cost to repair damaged van $ 5,000
Cost of a comparable used van $ 10,000

Based on the information above, Davenport would be financially better off:

Respuesta :

Answer:

Therefore, Davenport would be financially better off by repairing the damaged van for $4,000.

Explanation:

According to the given data in order to calculate how Davenport would be financially better off we would have to calculate the Benefit from repairing damaged van with the following formula:

Benefit from repairing damaged van=Cost of comparable used Van- Repair cost-salvage value before repair after crash

Benefit from repairing damaged van=$10,000 -$5,000 -$1,000

Benefit from repairing damaged van= $ 4,000

Therefore, Davenport would be financially better off by repairing the damaged van for $4,000.

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