Question
Granfield Company has a piece of manufacturing equipment with a book value of $48,000 and a remaining useful life of four years. At the end
Granfield Company has a piece of manufacturing equipment with a book value of $48,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $168,000 and receive $28,400 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $55,000 per year. The new equipment will reduce variable manufacturing costs by $27,000 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is
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