Accounting -Ridley Company has a factory machine with a book value

| January 30, 2017

Question
Question 5
Ridley Company has a factory machine with a book value of $90,200 and a remaining useful life of 5 years. A new machine is available at a cost of $202,400. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $589,300 to $360,100.

Prepare an analysis showing whether the old machine should be retained or replaced. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)

Retain
Equipment

Replace
Equipment Net 5-Year
Income
Increase
(Decrease)
Variable manufacturing costs $ $ $
New machine cost
Total $ $ $

The old factory machine should be replacedretained.

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