At the beginning of last year (2019), Richter 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 $159,000 $95,000 0 0 4 years Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs other than depreciation: Variable 5 years Straight-line Straight line $35,400 $10,000 Fixed 22,400 8,000 Annual revenues are $240,000, 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 2020, Richter Condos will be able to sell it for $25,800, Determine any gain or loss if the old elevator is replaced. e Textbook and Media Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues $ Less costs: Variable costs Fixed costs Selling & administrative Depreciation Net income $ (2) The old elevator is replaced. Replace Old Elevator Revenues $ Less costs: Variable costs Fixed costs Selline & administrative Depreciation Operating income (2) The old elevator is replaced. Replace Old Elevator Revenues $ Less costs Variable costs $ Fixed costs Selling & administrative Depreciation Operating income Loss on old elevator Netincome $ e Textbook and Media Using incremental analysis, determine if the old elevator should be replaced. In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number eg. -15 or parentheses es (151) Retain Old Elevator Replace Old Elevator Net Income Increase (Decrease) Variable operating costs 5 Fixed operating costs Using incremental analysis, determine if the old elevator should be replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number es-15 or parentheses eg. (15)) Retain Old Elevator Replace Old Elevator Net Income Increase (Decrease) Variable operating costs $ $ $ Fixed operating costs New elevator cost Salvage on old elevator Totals $ $ $ The old elevator be replaced
