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.
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