P21-4BLast year (2016), Simmons Company installed new factory equipment. The owner of the company, Gene Simmons, recently returned from an industry equipment exhibition where he watched computerized equipment demonstrated. He was impressed with the equipment's speed and cost efficiency. Upon returning from the exhibition, he asked his purchasing agent to collect price and operating cost data on the new equipment. In addition, he asked the company's accountant to provide him with cost data on the company's equipment. This information is presented below. Old Equipment New Equipment $210,000 $250,000 5 years Straight-line 4 years Straight-line Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs other than depreciation Variable Fixed $50,000 30,000 $12,000 ,000 Annual revenues are $360,000, and selling and administrative expenses are $45,000, regardless of which equipment is used. If the old equipment is replaced now, at the beginning of 2017, Simmons Company will be able to sell it for $58,000. Instructions (a) Determine any gain or loss if the old equipment is replaced. (b) Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old equipment is retained. (2) The old equipment is replaced. (c) Using incremental analysis, determine if the old equipment should be replaced. Prob 21-4B (a) - Show your calculations below: Book Value (6-1) 4 year Income Statement Retain Old Equipment Revenues (360.000 x 4 yrs 1,440.000 Less Costs: R (6-2) 4 year Income Statement Replace Old Equipment Revenues (360,000 x 4 yrs) 1.440.000 Less Costs Operating (net) Income (c) Incremental Analysis Retain Old Equipment Replace Old Equipment Net Income Increase or (Decreased