Company has a factory machine with a book value of $85,700 and a remaining useful life of 5 years. It can be sold for $26,500. A new machine is available at a cost of $468,800. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $647,500 to $550,000. 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 eg. -45 or parentheses e.g. (45)) Variable manufacturing costs $ New machine cost Sell old machine Total The old factory machine should be Retain Equipment $ Replace Equipment S Net Income Increase (Decrease)

Company has a factory machine with a book value of $85,700 and a remaining useful life of 5 years. It can be sold for $26,500. A new machine is available at a cost of $468,800. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $647,500 to $550,000. 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 eg. -45 or parentheses e.g. (45)) Variable manufacturing costs $ New machine cost Sell old machine Total The old factory machine should be Retain Equipment $ Replace Equipment S Net Income Increase (Decrease)

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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