Question

ES CALCLATOR PL SCREN PHINTER VERSE BACK NEXT Exercise 20-14 Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing Current New Machine Machine Original purchase cost Accumulated depreciation $15,400 $24,500 ady Estimated annual operating costs Remaining useful ife $5,600 $24,800 S years $19,500 5 years If sold now, the current machine would have a salvage value of $8,700. expected to have zero salvage value after 5 years operated for the remainder of ts useful ie, he curnent machine would have sero salvape value The new machine is Should the current machine be replaced? (In the first two columas, enter costs and expenses as pesitive amounts and any amounts recelved as negative amounts In the thind column, enter net income increases as positive amounts and decreases as negative amounts Enter negative amounts anng either a negative aign preceding the numder e-45 or parentheses e.g. (45).) Retain Machine Replace Machine Net Income Increase (Decrease) Operating costs New machine cost Salvage value (old) Total Privacy Pce R 2000 2019 Jphn Wiley

Answer 1

Incremental Analysis
	Retain	Replace	Net Income Increase
operating costs	124,000	97,500	26,500
New machine cost	0	24,500	-24,500
Salvage value	0	-8,700	8,700
Total	124,000	113,300	10,700
Should replace