Granfield Company has a piece of manufacturing equipment with a book value of $39,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $21,800. Granfield can purchase a new machine for $118,000 and receive $21,800 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $18,800 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is: O $75,200 decrease O $51,300 increase O $17,200 decrease O $21,000 increase O $21,000 decrease A
Granfield Company has a piece of manufacturing equipment with a book value of $39,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $21,800. Granfield can purchase a new machine for $118,000 and receive $21,800 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $18,800 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is: O $75,200 decrease O $51,300 increase O $17,200 decrease O $21,000 increase O $21,000 decrease A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Granfield Company has a piece of manufacturing equipment with a book value of $39,000 and a remaining useful life of four years.
At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $21,800.
Granfield can purchase a new machine for $118,000 and receive $21,800 in return for trading in its old machine. The new machine
will reduce variable manufacturing costs by $18,800 per year over the four-year life of the new machine. The total increase or
decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:
O $75,200 decrease
O $51,300 increase
O $17,200 decrease
O $21,000 increase
O $21,000 decrease
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