Granfield Company has a piece of manufacturing equipment with a book value of $49,500 and a remaining
Question:
Granfield Company has a piece of manufacturing equipment with a book value of $49,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $177,000 and receive $29,600 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $58,000 per year. The new equipment will reduce variable manufacturing costs by $28,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment would be?
a. $33,400 decrease
b. $114,000 increase
c. $16,100 decrease
d. $77,650 increase
e. $33,400 increase
Financial Accounting: A Business Process Approach
ISBN: 978-0136115274
3rd edition
Authors: Jane L. Reimers