Need help with this questions ASAP! I provided the template P21-4B owner of the
ID: 2463468 • Letter: N
Question
Need help with this questions ASAP! I provided the template
P21-4B owner of the company, Gene Simmons, recently returned from an industry equipment exhibition where he watched computerized equipment demonstrated. He was impressed with the equipments speed and cost efficiency. Upon returning from the exhibition, he asked his purchasing agent to collect price and operating cost data orn the new equipment. In addition, he asked the company's accountant to provide him with cost data on the company's equipment. This information is presented below Last year (2016), Simmons Company installed new factory equipment. The Compute gain or loss, and determine if equipment should be replaced (LO 5) Old Equipment New Equipment Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs 210,000 0 5 years Straight-line 250,000 0 4 years Straight-line other than depreciation: Variable Fixed $50,000 30,000 $12,000 5,000 Annual revenues are $360,000, and selling and administrative expenses are $45,000, regardless of which equipment is used. If the old equipment is replaced now, at the beginning of 2017, Simmons Company will be able to sell it for $58,000 Instructions (a) Determine any gain or loss if the old equipment is replaced (b) Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old equipment is retained (2) The old equipment is replaced. (b) (2) NI $832,000 (c) Using incremental analysis, determine if the old equipment should be replaced. (c) NI increase (d) Write a memo to Gene Simmons explaining why any gain or loss should be $60,000 ignored in the decision to replace the old equipment.Explanation / Answer
1 if old equipment is not relaced: depriciation 42000 variable cost 50000 fixed 30000 total cost in 5 year 610000 if old equipent is replaced depriciation 62500 variable 12000 fixed 5000 total cost in 4 year 318000 - sale of old equipment 58000 net cost 260000