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everything is correct except for the depreciation of the old machine and salvage value. I've added all the values, and even the zeros but they
everything is correct except for the depreciation of the old machine and salvage value. I've added all the values, and even the zeros but they keep turning out wrong. :(
Murl Plastics Inc. purchased a new machine one year ago at a cost of $54,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below: Present Machine Proposed New Machine $81,000 $54,000 Purchase cost new Estimated useful life new Annual operating costs Annual straight-line depreciation Remaining book value Salvage value now Salvage value in five years 6 years 5 years $37,800 9,000 45,000 9,000 $12,600 16,200 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 $45,000 9,000 Net loss from disposal $36,000 "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 $189,000 per year, and selling and administrative expenses are expected to be $113,400 per year, regardless of which machine is used Required: 1. Prepare a summary income statement covering the next five years, assuming the following a. The new machine is not purchased b. The new machine is purchased. (Leave no cells blank - be certain to enter "O" wherever required.) 5 Years Summary Keep Old Machine Buy New Machine Difference $ 945,000$ 945,000!$ Sales Selling and administrative expenses Depreciation of the old machine, or loss write-off Depreciation-new machine Operating costs Salvage value-old machine 567,000 45,000 0 189,000 567,000 0 81,000 63,000 81,000 (126,000) 0 801,000 747,000 Total expenses Net operating income 54,000 54,000 $144,000$ 198,000 $Step by Step Solution
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