Problem 12-4 (Part Level Submission) Last year (2016), Culver 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 $101,000 New Elevator $160,000 Purchase price 5 years Straight-line 4 years Straight-line Estimated salvage value Estimated useful life Depreciation method Annual operating costs other than depreciation: Variable $34,600 23,900 $9,000 8,600 Fixed 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, Culver Condos will be able to sell it for $24,900. Your answer is correct. Determine any gain or loss if the old elevator is replaced. Loss on sale 55,900 (b) Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues 956,000 Less costs: Variable costs 138,400 Fixed costs T 95,600 Selling & administrative T 116,000 Depreciation T 80,800 430,800 Net income 525,200 (2) The old elevator is replaced. Replace Old Elevator 956,000 Revenues Less costs: Variable costs 1 36,000 Fixed costs 1 34,400 Selling & administrative T 116,000 Depreciation 160,000 346,400 Operating income Less: Loss on old elevator 9 509,600 -55,900 553,700 1 Net income 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 Fixed operating costs New elevator cost Salvage on old elevator Totals