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Replace Equipment A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for $214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new machine would reduce annual direct labor costs from $50,400 to $40,300. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine Line Item Description June 2 Continue with Old Machine Replace Old Differential Machine Effects (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine 0.00 $ 214,100 214,100 Costs: Purchase price Direct labor (6 years) Profit (loss) $ 0.00 -283,500 -283,500 302,400 241,800 60,600 -302,400 St 0 X B

Replace Equipment A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for $214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new machine would reduce annual direct labor costs from $50,400 to $40,300. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine Line Item Description June 2 Continue with Old Machine Replace Old Differential Machine Effects (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine 0.00 $ 214,100 214,100 Costs: Purchase price Direct labor (6 years) Profit (loss) $ 0.00 -283,500 -283,500 302,400 241,800 60,600 -302,400 St 0 X B

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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Replace Equipment A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for $214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new machine would reduce annual direct labor costs from $50,400 to $40,300. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine Line Item Description June 2 Continue with Old Machine Replace Old Differential Machine Effects (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine 0.00 $ 214,100 214,100 Costs: Purchase price Direct labor (6 years) Profit (loss) $ 0.00 -283,500 -283,500 302,400 241,800 60,600 -302,400 St 0 X B
Transcribed Image Text:Replace Equipment A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for $214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new machine would reduce annual direct labor costs from $50,400 to $40,300. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine Line Item Description June 2 Continue with Old Machine Replace Old Differential Machine Effects (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine 0.00 $ 214,100 214,100 Costs: Purchase price Direct labor (6 years) Profit (loss) $ 0.00 -283,500 -283,500 302,400 241,800 60,600 -302,400 St 0 X B
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