I really need help:( Instructions A machine with a book value of $121,010 has an
ID: 2568973 • Letter: I
Question
I really need help:(
Instructions A machine with a book value of $121,010 has an estimated six-year life. A proposal is offered to sell the old machine for $86,390 and replace it with a new machine at a cost of $154,850. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $56,500 to $43,150. Required: 1. Prepare a differential analysis dated February 18 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "O". A colon (:) will automatically appear if required. 2. Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up Statementshowing Computations Continue with old machine Replace Old machine Differential effect on income Paticulars Alternative 1 Alternative 2 Alternative 2 Revenues: Proceeds from sale of old machine 86,390.00 86,390.00 Costs: Purchase price (154,850.00) (154,850.00) Direct Labour (6 Years) (339,000.00) (258,900.00) 80,100.00 Income (Loss) (339,000.00) (327,360.00) 11,640.00 Company should replace the old machine as it will increase income by $11,640 over 6 Years