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Granfield Company has a piece of manufacturing equipment with a book value of $35,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $21,100. Granfield can purchase a new machine for $111,000 and receive $21,100 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $18,100 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:

$17,500 increase
$72,400 decrease
$14,400 decrease
$48,850 increase
$17,500 decrease

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91748648

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