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The law firm of Ivanhoe and Metlock relies heavily on a colour laser printer to process its paperwork. Recently the printer has not functioned well
The law firm of Ivanhoe and Metlock relies heavily on a colour laser printer to process its paperwork. Recently the printer has not functioned well and print jobs were not being processed. A major overhaul costing $12,600 would make the current printer work properly for the balance of its useful life. Management is considering updating the printer with a faster model. Current Printer New Model Original purchase cost $31,500 $24,100 Accumulated depreciation 16,900 Estimated operating costs (annual) 3,200 2,000 Useful life 4 years 4 years If sold now, the current printer would have a salvage value of $4,500. If operated for the remainder of its useful life, the current printer would have zero salvage value. The new printer is expected to have zero salvage value after 4 years. Prepare an analysis to show whether the company should retain or replace the printer. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Keep Printer Period of 4 years Replace Printer Net Income Increase (Decrease) Prepare an analysis to show whether the company should retain or replace the printer. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Period of 4 years Variable costs Major overhaul Salvage value New machine cost Keep Printer The company should $ LA the printer. Replace Printer Net Income Increase (Decrease) LA $
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