Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hello, can someone please help me. I'm new to accounting and i'm having lots of trouble with this question and i''m not sure how to

image text in transcribedimage text in transcribedimage text in transcribed

Hello, can someone please help me. I'm new to accounting and i'm having lots of trouble with this question and i''m not sure how to solve them. i would really really appreciate your help.

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed
7 . Value* 10.00 points Problem 9 - 1 Making an Equipment Replacement Decision ( LO1 - CC 2 ) Murk Plastics Inc . purchased a new machine one year ago at a cost of $63, 000 . Although the machine* operates well , the president of Mum 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 casts by two - thirds , as shown in the comparative data below :" Present Proposed Machine New Machine Purchase cost new $63, 000 $:94, 500 Estimated useful life new* 6 years Annual operating costs $44, 100 $ 14, 700 5 years Annual straight - line depreciation 10, 500 18, 500 Remaining book value* 52, 500 Salvage value now* 10, 500 Salvage value in five years In trying to decide whether to purchase the new machine , the president has prepared the following analysis ." Book value of the old machine $52, 500 Less : Salvage value 10, 500 Net loss from disposal $42, 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 $2 20, 5,00 per year , and selling and administrative expenses are expected to be $ 132, 300 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 . 6 . The new machine is purchased . | Leave no cells blank - be certain to enter " O " wherever required . !) 5 Years Summary Keep Old Buy NOW Machine* Machine Difference Total EXPENSES@ Answer is not complete . 5. Years Summary Keep Old Buy NEW Machine Machine Difference Sales @$ 1, 102,500 0|$ 1, 102,500 0| Selling and administrative EXPENSES (1651, 50.010 $61, 500 0 @ @ Operating costs 220.500 0 73.500 0 147, 000 0 Depreciation of the old machine , or loss write - 52,500 0 94, 50013 |42, 0001 83 @ Salvage value - old machine* 42, 000 03\\ |42, 0001 83 Total EXPENSES 9:34, 50010 $71, 500 0 63,000 0 Net operating income 160,000 0|#` 231,000 02. Compute the net advantage of purchasing the new product using relevant costs . of purchasing the new machine

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Entrepreneurship

Authors: Andrew Zacharakis, William D Bygrave

5th Edition

1119563097, 9781119563099

More Books

Students also viewed these Accounting questions

Question

Peoples understanding of what is being said

Answered: 1 week ago

Question

The quality of the proposed ideas

Answered: 1 week ago