Granfield Company has a piece of manufacturing equipment wit…
Granfield Company has a piece of manufacturing equipment with a book value of $40,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $120,000 and receive $22,000 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $39,000 per year. The new equipment will reduce variable manufacturing costs by $19,000 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment is: