P7-4B Last 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 pur- chasing 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 equip- ment. This information is presented below. Purchase price Estimated salvage value Estimated useful life Old Equipment $210,000 0 5 years New Equipment $250,000 0 4 years Straight-line Depreciation method Straight-line Annual operating costs other than depreciation: Variable Fixed $50,000 30,000 $12,000 5,000 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 begin- ning 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.