Replace Equipment A machine with a book value of $62,400 has an estimated 5-year life. A proposal is offered to sell the old machine for $39,400 and replace it with a new machine at a cost of $58,500. The new machine has a 5-year life with no residual value. The new machine would reduce annual direct labor costs from $8,700 to $5,900. Prepare a differential analysis dated April 11 on whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 11 Continue with Replace Old Differential Old Machine Machine Effect (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Direct labor (5 years) Profit (loss) Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?

Replace Equipment A machine with a book value of $62,400 has an estimated 5-year life. A proposal is offered to sell the old machine for $39,400 and replace it with a new machine at a cost of $58,500. The new machine has a 5-year life with no residual value. The new machine would reduce annual direct labor costs from $8,700 to $5,900. Prepare a differential analysis dated April 11 on whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 11 Continue with Replace Old Differential Old Machine Machine Effect (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Direct labor (5 years) Profit (loss) Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?

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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A company is considering replacing an old piece of machinery, which cost $168,000 and has $88,000 of accumulated depreciation to date, with a new machine that has a purchase price of $107,900. The old machine could be sold for $90,100. The annual variable production costs associated with the old machine are estimated to be $11,200 per year for 8 years. The annual variable production costs for the new machine are estimated to be $8,000 per year for 8 years. a. Prepare a differential analysis dated April 29 to determine whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29 Continuewith OldMachine(Alternative 1) ReplaceOldMachine(Alternative 2) DifferentialEffects(Alternative 2) Revenues: Proceeds from sale…