Ridley Company has a factory machine with a book value of $88,600 and a remaining useful life of 4 years. A new machine is available at a cost of $213,400. This machine will have a 4-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $554,000 to $423,600.

Prepare an analysis showing whether the old machine should be retained or replaced. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)
                                    Retain                         Replace                       Net 6 Year
                                    Equipment                  Equipment I                ncome
                                                                                                            Increase
                                                                                                            (Decrease)

 

 

 

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