Murl Plastics Inc. purchased a new machine one year ago at a cost of $60,000. 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:

	Present Machine			Proposed New Machine
Purchase cost new	$	60,000		$	90,000
Estimated useful life new		6	years		5	years
Annual operating costs	$	42,000		$	14,000
Annual straight-line depreciation		10,000			18,000
Remaining book value		50,000
Salvage value now		10,000
Salvage value in five years		0			0

In trying to decide whether to purchase the new machine, the president has prepared the following analysis:

Book value of the old machine	$	50,000
Less: Salvage value		10,000
Net loss from disposal	$	40,000

Even though the new machine looks good, said the president, we cant get rid of that old machine if it means taking a huge loss on it. Well have to use the old machine for at least a few more years.

Sales are expected to be $210,000 per year, and selling and administrative expenses are expected to be $126,000 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.

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 "O" wherever required.) 5 Years Summary Keep Old Machine Buy New Machine Difference $ 210,00210,000S 42,000 10,000 126,000 14,000 18,000 126,000 30,000 (8,000) Operating costs epreciation of the old machine, or loss write-off elling and administrative expenses alvage value-old machine 20,000 $ 32,00052,00020,000) Total expenses 178,000 158,000 et operating income 2. Compute the net advantage of purchasing the new product using relevant costs of purchasing the new machine