5:19 Santosh Plastics Inc. purchased a new machine one year ago at a cost of $111,000. Although the machine operates well and has five more years of operating life, the president of Santosh Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine costs $166,500 and is expected to slash the current annual operating costs of $77,700 by two-thirds. The new machine is expected to last for five years, with zero salvage value at the end of five years. The current machine can be sold for $18,500 if the company decides to buy the new machine. The company uses straight-line depreciation. In trying to decide whether to purchase the new machine, the president has prepared the following analysis: Book value of the old machine Less: Salvage value Net loss from disposal $92,500 18,500 $74,000 "Even though the new machine looks good," said the president, "we can't get rid of that old machine if it means taking a huge loss on it. We'll have to use the old machine for at least a few more years." Sales are expected to be $388,500 per year, and selling and administrative expenses are expected to be $233,100 per year, regardless of which machine is used. Required: 1. Prepare a comparative income statement covering the next five years, assuming: a. The new machine is not purchased. b. The new machine is purchased. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) 5 Years Summary Keep Old Machine Buy New Difference Machine < Prev 12 of 13 Next >