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Crane Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Crane Roofing spent $66,600 refurbishing the lift. It has just determined that another $30,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $129,000. The company estimates that both lifts would have useful lives of 5 years. The new lift is more efficient and thus would reduce operating expenses from $92,000 to $69,800 each year. Crane Roofing could also rent out the new lift for about $7,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $19,000 if the new lift is purchased. The new lift and old lift are estimated to have salvage values of zero if used for another 6 years. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Operating expenses $ Repair costs Rental revenue New machine cost Sale of old machine Total cost $ Retain Equipment 30500 $ $ Replace Equipment $ $ Net Income Increase (Decrease)

Crane Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Crane Roofing spent $66,600 refurbishing the lift. It has just determined that another $30,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $129,000. The company estimates that both lifts would have useful lives of 5 years. The new lift is more efficient and thus would reduce operating expenses from $92,000 to $69,800 each year. Crane Roofing could also rent out the new lift for about $7,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $19,000 if the new lift is purchased. The new lift and old lift are estimated to have salvage values of zero if used for another 6 years. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Operating expenses $ Repair costs Rental revenue New machine cost Sale of old machine Total cost $ Retain Equipment 30500 $ $ Replace Equipment $ $ Net Income Increase (Decrease)

FINANCIAL ACCOUNTING
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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Crane Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Crane Roofing spent $66,600 refurbishing the lift. It has just determined that another $30,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $129,000. The company estimates that both lifts would have useful lives of 5 years. The new lift is more efficient and thus would reduce operating expenses from $92,000 to $69,800 each year. Crane Roofing could also rent out the new lift for about $7,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $19,000 if the new lift is purchased. The new lift and old lift are estimated to have salvage values of zero if used for another 6 years. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Operating expenses $ Repair costs Rental revenue New machine cost Sale of old machine Total cost $ Retain Equipment 30500 Replace Equipment $ $ Net Income Increase (Decrease)
Transcribed Image Text:Crane Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Crane Roofing spent $66,600 refurbishing the lift. It has just determined that another $30,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $129,000. The company estimates that both lifts would have useful lives of 5 years. The new lift is more efficient and thus would reduce operating expenses from $92,000 to $69,800 each year. Crane Roofing could also rent out the new lift for about $7,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $19,000 if the new lift is purchased. The new lift and old lift are estimated to have salvage values of zero if used for another 6 years. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Operating expenses $ Repair costs Rental revenue New machine cost Sale of old machine Total cost $ Retain Equipment 30500 Replace Equipment $ $ Net Income Increase (Decrease)
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