Adams Moran manages the cutting department of Greene Baird Company. He purchased a tree$-$cutting machine on January $1,$ Year $2,$ for $$360,000.$ The machine had an estimated useful life of $5$ years and zero salvage value, and the cost to operate it is $$91,000$ per year. Technological developments resulted in the development of a more advanced machine available for purchase on January $1,$ Year $3,$ that would allow a $25$ percent reduction in operating costs. The new machine would cost $$210,000$ and have a $4-$year useful life and zero salvage value. The current market value of the old machine on January $1,$ Year $3,$ is $$198,000,$ and its book value is $$288,000$ on that date. Straight$-$line depreciation is used for both machines. The company expects to generate $$220,000$ of revenue per year from the use of either machine.

Required

a$.$ Recommend whether to replace the old machine on January $1,$ Year $3.$

b$.$ Prepare income statements for four years $($Year $3$ through Year $6)$ assuming that the old machine is retained.

c$.$ Prepare income statements for four years $($Year $3$ through Year $6)$ assuming that the old machine is replaced.

Complete this question by entering your answers in the tabs below.

Required $A$

Required B

Recommend whether to replace the old machine on January $1,$ Year $3.$

$\backslash$table$[[$Decision$,$Keep Old,Replace With New$],[$Total avoidable costs,,$],[$Should the old machine be replaced on January $1,$ Year $3?,,]]$