FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Pharoah Company has a factory machine with a book value of $90.800 and a remaining useful life of 7 years. It can be sold for $27.200.
A new machine is available at a cost of $407 400. This machine will have a 7-year useful life with no salvage value. The new machine
will lower annual variable manufacturing costs from $640,100 to $581.800 Prepare an analysis showing whether the old machine
should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative
amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using
either a negative sign preceding the number eg. -45 or parentheses eg. (45))
Variable manufacturing costs
New machine cost
Sell old machine
Total
S
The old factory machine should be
Retain
Equipment
$
Replace
Equipment
$
$
Net Income
Increase (Decrease)
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Transcribed Image Text:Pharoah Company has a factory machine with a book value of $90.800 and a remaining useful life of 7 years. It can be sold for $27.200. A new machine is available at a cost of $407 400. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $640,100 to $581.800 Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Variable manufacturing costs New machine cost Sell old machine Total S The old factory machine should be Retain Equipment $ Replace Equipment $ $ Net Income Increase (Decrease)
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