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Riener Hospital has an x-ray machine with a book value of $60,000 and a remaining...

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Accounting

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:

Multiple Choice

  • $22,000 decrease

  • $76,000 increase

  • $18,000 decrease

  • $52,000 increase

  • $22,000 increase

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