Last year (2016), Blue Condos installed a mechanized elevator for its tenants. The owner of the company,
Question:
Last year (2016), Blue Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition where he watched a computerized elevator demonstrated. He was impressed with the elevator's speed, comfort of ride, and cost efficiency. Upon returning from the exhibition, he asked his purchasing agent to collect price and operating cost data on the new elevator. In addition, he asked the company’s accountant to provide him with cost data on the company’s elevator. This information is presented below. .
Old Elevator New Elevator
Purchase price $105,000 $160,000
Estimated salvage value 0 0
Estimated useful life 5 years 4 years Depreciation method Straight-line Straight-line Annual operating costs other than depreciation:
Variable $35,100 $11,000
Fixed 23,800 8,000
Annual revenues are $241,000, and selling and administrative expenses are $29,000, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2017, Blue Condos will be able to sell it for $24,500. Determine any gain or loss if the old elevator is replaced.
Accounting Principles
ISBN: 978-1118875056
12th edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso