Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Current Attempt in Progress At the beginning of last year (2019). Richter Condos installed a mechanized elevator for its tenants. The owner of the company,
Current Attempt in Progress 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 Purchase price $96,000 $159,000 Estimated salvage value 0 0 Estimated useful life 4 years Depreciation method Straight-line Straight-line Annual operating costs other than depreciation: Variable $36,000 $10,000 Fixed 23,600 8,700 5 years 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 2020, Richter Condos will be able to sell it for $25,200. (a) Your answer is correct. Determine any gain or loss if the old elevator is replaced. Loss on sale 51600 e Textbook and Media Attempts: 2 of 5 used (b) Your answer is partially correct. Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator $ 956000 $ Revenues Less costs: Variable costs Fixed costs Selling & administrative 144000 94400 116000 Depreciation 76800 431200 Net income $ 524800 (2) The old elevator is replaced. (2) The old elevator is replaced. Replace Old Elevator $ 956000 40000 34800 Revenues Less costs: Variable costs Fixed costs Selling & administrative Depreciation Operating income Loss on old elevator Net income 116000 159,000 -349800 -51600 $ e Textbook and Media
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started