Problem 12-4 (Part Level Submission)

Last year (2016), Bridgeport 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 below.

Determine any gain or loss if the old elevator is replaced.

Loss on Sale of $57,700

(Ignore the red, those are wrong answers from previous attempts)

Old Elevator $98,500 New Elevator $159,000 0 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 $35,300 24,000 $10,000 8,900 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 2017, Bridgeport Condos will be able to sell it for $25,700. (b) Your answer is partially correct. Try again. Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues 960000 $ Less costs: Variable costs 140800 Fixed costs 89200 Selling & administrative 116000 Depreciation 83200 429200 Net income 530800 $ (2) The old elevator is replaced. Replace Old Elevator Revenues 960000 Less costs: Variable costs 36000 Fixed costs 34000 Selling & administrative 116000 Depreciation 161000 347000 Operating income 613000 Less: Loss on old elevator 57700 Net income 555300