Bryant Company has a factory machine with a book value of $90,000 and a remaining useful life of 5 years. It can be sold for $30,000. A new machine is available at a cost of $400,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $600,000 to $500,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Equipment Replace Equipment Net Income Increase (Decrease) Variable manufacturing costs $enter a dollar amount $enter a dollar amount $enter the difference between the two previous amounts in the row New machine cost enter a dollar amount enter a dollar amount enter the difference between the two previous amounts in the row Sell old machine enter a dollar amount enter a dollar amount enter the difference between the two previous amounts in the row Total $enter a total amount $enter a total amount $enter a total amount The old factory machine should be select between replaced and retained

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bryant Company has a factory machine with a book value of $90,000 and a remaining useful life of 5 years. It can be sold for $30,000. A new machine is available at a cost of $400,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $600,000 to $500,000. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

	Retain Equipment	Replace Equipment	Net Income Increase (Decrease)
Variable manufacturing costs	$enter a dollar amount	$enter a dollar amount	$enter the difference between the two previous amounts in the row
New machine cost	enter a dollar amount	enter a dollar amount	enter the difference between the two previous amounts in the row
Sell old machine	enter a dollar amount	enter a dollar amount	enter the difference between the two previous amounts in the row
Total	$enter a total amount	$enter a total amount	$enter a total amount

The old factory machine should be select between replaced and retained .

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