Question 21 Chapter 23 Assignment

Granfield Company has a piece of manufacturing equipment with a book value of $49,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $174,000 and receive $29,200 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $57,000 per year. The new equipment will reduce variable manufacturing costs by $28,000 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is:

Multiple Choice

$32,800 decrease

$112,000 increase

$16,200 decrease

$76,300 increase

$32,800 increase