At the beginning of last year (2021), 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 companys accountant to provide him with cost data on the companys elevator. This information is presented here.

Old Elevator New Elevator Purchase price $104,500 $161,000 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 $35,600 $11,000 Fixed 23,200 9,000

Annual revenues are $239,000, 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 2022, Richter Condos will be able to sell it for $24,700. (a) Determine any gain or loss if the old elevator is replaced.

Prepare a 4-year summarized income statement for each of the following assumptions:

(1) The old elevator is retained.

Retain Old Elevator Revenues $enter a dollar amount Less costs: Variable costs $enter a dollar amount Fixed costs enter a dollar amount Selling & administrative enter a dollar amount Depreciation enter a dollar amount enter a subtotal of the previous four amounts Net income $enter a net income or loss amount in dollar

(2) The old elevator is replaced.

Replace Old Elevator Revenues $enter a dollar amount Less costs: Variable costs $enter a dollar amount Fixed costs enter a dollar amount Selling & administrative enter a dollar amount Depreciation enter a dollar amount enter a subtotal of the previous four amounts Operating income enter operating income amount in dollar Less: Loss on old elevator enter Loss on old elevator in dollars Net income