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Last year (2019), Calway Condos installed a mechanized elevator for its tenants. The owner of the company, Cab Calway, recently returned from an industry equipment
Last year (2019), Calway Condos installed a mechanized elevator for its tenants. The owner of the company, Cab Calway, recently returned from an industry equipment exhibition where he watched a computerized elevator demonstrated. He was impressed with the elevator's speed, comfortable 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. The information is presented below: Old Elevator New Elevator Purchase price $123,600 $180,300 Estimated salvage value 0 Estimated useful life 6 years 5 years Depreciation method Straight-line Straight-line Annual operating expenses other than depreciation: Variable $35,100 $12,800 Fixed 22,300 8,200 Annual revenues are $239,200 and selling and administrative expenses are $28,800, regardless of which elevator is used. If it replaces the old elevator now, at the beginning of 2020, Calway Condos will be able to sell it for $25,900. (a) Determine any gain or loss if the old elevator is replaced. If the old elevator is replaced Calway Condos will incur a of $
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