Riener Hospital Has an X-Ray Machine with a Book Value

Riener Hospital has an x-ray machine with a book value of $60,000 and a remaining useful life of three years.At the end of the three years the equipment will have a zero salvage value.The market value of the equipment is currently $32,000.Riener can purchase a new machine for $145,000 and receive $28,000 in return for trading in its old machine.The new machine will reduce variable manufacturing costs by $27,000 per year over the three-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:

A) $22,000 decrease
B) $76,000 increase
C) $18,000 decrease
D) $52,000 increase
E) $22,000 increase

Correct Answer:

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