Johnson Enterprises uses a computer to handle its sales invoices. Lately, busine

Question

Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extre 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 New Machine Current Machine $14,700 $6,500 $24,900 5 years $25,500 Original purchas cost Accumulated depreciation Estimated annual operating costs Remaining useful life $19,800 5 years 1f sold now, the current machine would have a salva e value of 10,400. Î operated or the remainder ofits useful if the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years. Should th@ current machirie b replaced? In the first two columns, enter costs and expenses as positive amounts and any amounts rece ved as negative amounts. In the third column, enter net income increases as positivc amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Machine Replace Machine Net Income Increase (Docrease) Operating costs New machine cost Salvage value (old) Total The current mechine should be

Explanation / Answer

Retain machine Replace machine Net income change Operating costs 124500 99000 25500 New machine cost 25500 -25500 Salvage value(old) -10400 10400 Total 124500 114100 10400 The current machine should be replaced

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