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Ivanhoe 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, Ivanhoe Roofing spent $74.400 refurbishing the lift. It has just determined that another $41,500 of repair wor required. Alternatively, it has found a newer used lift that is for sale for $177,000. The company estimates that both lifts would have useful lives years. The new lift is more efficient and thus would reduce operating expenses by about $24,800 per year. Ivanhoe Roofing could also rent out th new lift for about $10,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $26,000 if the new lift is purchase Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a neg sigm preceding the number es-45 or parentheses es. (45)) Retain Replace Net Income

Ivanhoe 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, Ivanhoe Roofing spent $74.400 refurbishing the lift. It has just determined that another $41,500 of repair wor required. Alternatively, it has found a newer used lift that is for sale for $177,000. The company estimates that both lifts would have useful lives years. The new lift is more efficient and thus would reduce operating expenses by about $24,800 per year. Ivanhoe Roofing could also rent out th new lift for about $10,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $26,000 if the new lift is purchase Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a neg sigm preceding the number es-45 or parentheses es. (45)) Retain Replace Net Income

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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Ivanhoe 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, Ivanhoe Roofing spent $74,400 refurbishing the lift. It has just determined that another $41,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $177,000. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $24,800 per year. Ivanhoe Roofing could also rent out the new lift for about $10,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $26,000 if the new lift is purchased. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sigm preceding the number es-45 or parentheses es (45)) Retain Equipment Replace Equipment Operating expenses $ 148800 Net Income Increase (Decrease) 148800 $ 0 Repair costs 41500 0 41500 Rental revenue 0 -63000 63000 New machine cost 0 177000 -177000 Sale of old machine 0 -26000 26000 Total cost $ 190300 $ 236800 -46500 Should company repair or replace the equipment? The equipment should ❤be replaced.
Transcribed Image Text:Ivanhoe 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, Ivanhoe Roofing spent $74,400 refurbishing the lift. It has just determined that another $41,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $177,000. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $24,800 per year. Ivanhoe Roofing could also rent out the new lift for about $10,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $26,000 if the new lift is purchased. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sigm preceding the number es-45 or parentheses es (45)) Retain Equipment Replace Equipment Operating expenses $ 148800 Net Income Increase (Decrease) 148800 $ 0 Repair costs 41500 0 41500 Rental revenue 0 -63000 63000 New machine cost 0 177000 -177000 Sale of old machine 0 -26000 26000 Total cost $ 190300 $ 236800 -46500 Should company repair or replace the equipment? The equipment should ❤be replaced.
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