help

P11-17 Incremental operating cash flows Richard and Linda Thomson operates a local lawn maintenance services for commercial and residential property. They have been using a John Deer riding mower for the past several years and believe that it is time to buy a new one. They would like to know the incremental (relevant) cash flows associated with the replacement of the old riding mower. The following data are available.

There are five years remaining useful life on the mower. The old mower has zero book value. The new mower is expected to last 5 years. The Thompsons will follow a 5 year MACRS recovery period for the new mower. Depreciation value of the new mower is $1,800. They are subject to a 40% tax rate. The new mower is expected to be mower fuel efficient, maneuverable, and durable than the previous models and can result in reduced operating expense of $500 per year. The Thompsons will buy a maintenance contract that calls for annual payments of $120. Create an incremental operating cash flow statement for the replacement of Richard and Linda