Question
Tanner Company has old equipment with a book value of $153,000 and a remaining five-year useful life. Tanner is considering purchasing new equipment at
Tanner Company has old equipment with a book value of $153,000 and a remaining five-year useful life. Tanner is considering purchasing new equipment at a price of $186,000. Tanner can sell the old equipment now for $124,000. The old equipment has variable manufacturing costs of $68,000 per year. The new equipment will reduce variable manufacturing costs by $27,000 per year over its five-year useful life. The total increase or decrease in net income by replacing the old equipment with the new equipment is Multiple Choice $30,600 decrease $52,000 increase $73,000 increase $134,000 increase. $52,000 decrease
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