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 extra 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.

Exercise 20-14 Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 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 Current Machine $14,900 $6,700 $24,500 5 years New Machine Original purchase cost Accumulated depreciation $24,600 Estimated annual operating costs Remaining useful life $19,500 5 years If sold now, the current machine would have a salvage value of $10,300. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years Should the current machine be 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 sian preceding the number e.a. -45 or parentheses e.q. (45).) Retain Machine Replace Machine Net Income Increase (Decrease) Operating costs New machine cost Salvage value (old) Total The current machine should be

Explanation / Answer

Retain machine Replace machine Net income change Operating costs 122500 97500 25000 New machine cost 24600 -24600 Salvage value(old) -10300 10300 Total 122500 111800 10700 The current machine shuld be replaced

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