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h a minus sign.) ace Analysis e costs $ GA Keep 0 $ Replace Income Increase (Decrease) from Replacing 0 $ 0

h a minus sign.) ace Analysis e costs $ GA Keep 0 $ Replace Income Increase (Decrease) from Replacing 0 $ 0

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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Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $52,000. Variable manufacturing costs are $36,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Req B Revenues Machine A: Keep or Replace Analysis Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should be indicated with a minus sign.) Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Machine A $ 115,000 19,000 $ Keep Machine B $ 125,000 15,000 0 $ < Req A Replace Income Increase (Decrease) from Replacing 0 $ Req B > 0
Transcribed Image Text:Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $52,000. Variable manufacturing costs are $36,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Req B Revenues Machine A: Keep or Replace Analysis Req C and D Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should be indicated with a minus sign.) Sale of existing machine Costs Purchase of new machine Variable manufacturing costs Income (loss) Machine A $ 115,000 19,000 $ Keep Machine B $ 125,000 15,000 0 $ < Req A Replace Income Increase (Decrease) from Replacing 0 $ Req B > 0
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