Problem 12-4 Last year (2016), Sarasota 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 $103,000 New Elevator $160,000 5 years Straight-line 4 years Straight-line Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs other than depreciation: Variable Fixed $35,800 23,800 $10,000 8,100 Annual revenues are $241,000, and selling and administrative expenses are $28,000, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2017, Sarasota Condos will be able to sell it for $24,800. Your answer is correct. Determine any gain or loss if the old elevator is replaced. Loss on sale 57600 Your answer is correct. Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues T 964000 Less costs: Variable costs 143200 Fixed costs 95200 Selling & administrative Depreciation 82400 432800 Net income 531200 (2) The old elevator is replaced. Replace Old Elevator 964000 Revenues Less costs: Variable costs 40000 Fixed costs 32400 Selling & administrative 112000 Depreciation 160000 344400 Operating income 619600 Less: Loss on old elevator 57600 Net income 562000 Your answer is partially correct. Try again. Using incremental analysis, determine if the old elevator should be replaced. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Old Elevator Replace Old Elevator Net Income Increase (Decrease) Variable operating costs 143200 40000 103200 Fixed operating costs 5200 32400 62800 New elevator cost Salvage on old elevator Totals 238400