Murl Plastics Inc. purchased a new machine one year ago at a cost of $72,000. 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: 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 Present Machine $72,000 6 years $50,400 12,000 60,000 12,000 Proposed New Machine $108,000 5 years $ 16,800 21,600 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 $60,000 12,000 Net loss from disposal $48,000 "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 $252,000 per year, and selling and administrative expenses are expected to be $ 151,200 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 "0" wherever required.) Answer is not complete. 5 Years Summary Difference Sales Selling and administrative expenses Operating costs Depreciationnew machine Depreciation of the old machine, or loss write- Keep Old Machine $ 1,260,000 756,000 252,000 Buy New Machine $1,260,000 756,000 84,000 108,000 48,000 168,000 12,000 off 60,000 0 Salvage value-old machine Total expenses Net operating income OU T 2. Compute the net advantage of purchasing the new product using relevant costs. of purchasing the new machine