Windsor Inc. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing the machine with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increase operating income by $4,550 per year over its useful life of 7 years. Original purchase cost Accumulated depreciation Remaining useful life Current Machine Incremental income $48.500 $24.000 New machine cost 7 years New Machine If sold now, the current sewing machine would have a salvage value of $15,400. If it is used for the remainder of its useful life, the current sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years. $30,000 Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) $ 7 years Retain $ Replace Incremental cost savings $
Windsor Inc. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing the machine with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increase operating income by $4,550 per year over its useful life of 7 years. Original purchase cost Accumulated depreciation Remaining useful life Current Machine Incremental income $48.500 $24.000 New machine cost 7 years New Machine If sold now, the current sewing machine would have a salvage value of $15,400. If it is used for the remainder of its useful life, the current sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years. $30,000 Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) $ 7 years Retain $ Replace Incremental cost savings $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Windsor Inc. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing the machine
with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increase operating
income by $4,550 per year over its useful life of 7 years.
Original purchase cost
Accumulated depreciation
Remaining useful life
Current
Machine
Incremental income
$48.500
$24.000
New machine cost
7 years
New Machine
If sold now, the current sewing machine would have a salvage value of $15,400. If it is used for the remainder of its useful life, the
current sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years.
$30,000
Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (If an amount reduces the net
income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)
$
7 years
Retain
$
Replace
Incremental cost savings
$
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