The law firm of Matadin and Howe relies heavily on a colour laser printer to process the paperwork. Recently the printer has not functioned well and print jobs were not being processed. Management is considering updating the printer with a faster model.

Current Printer New Model

Original purchase cost $30,200 $25,400

Accumulated depreciation 18,800

Estimated operating costs (annual )3,000 2,000

Useful life 4years 4years

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 after4years.

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

KeepPrinter Replace Printer Net Income

Increase (Decrease)

Period of4years

Variable costs $

Salvage value $

New machine cost $

enter a dollar amount

the company should keep OR replace the printer.