Granfield Company has a piece of manufacturing equipment with a book value of $38,000 and...
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Granfield Company has a piece of manufacturing equipment with a book value of $38,000 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 $21,600. Granfield can purchase a new machine for $116,000 and receive $21,600 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $18,600 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: $20,000 increase $74,400 decrease $16,400 decrease $50,600 increase $20,000 decrease
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