Question
Problem 20-4A (Part Level Submission) Last year (2016), Richter Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently
Problem 20-4A (Part Level Submission) Last year (2016), 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 companys accountant to provide him with cost data on the companys elevator. This information is presented below. Old Elevator New Elevator Purchase price $104,000 $161,000 Estimated salvage value 0 0 Estimated useful life 5 years 4 years Depreciation method Straight-line Straight-line Annual operating costs other than depreciation: Variable $35,200 $9,000 Fixed 22,300 8,500 Annual revenues are $240,000, 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, Richter Condos will be able to sell it for $25,500. Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues $ Entry field with correct answer Less costs: Variable costs $ Entry field with correct answer Fixed costs Entry field with correct answer Selling & administrative Entry field with correct answer Depreciation Entry field with correct answer Entry field with correct answer Net income $ Entry field with correct answer (2) The old elevator is replaced. Replace Old Elevator Revenues $ Entry field with correct answer Less costs: Variable costs $ Entry field with incorrect answer Fixed costs Entry field with incorrect answer Selling & administrative Entry field with incorrect answer Depreciation Entry field with incorrect answer Entry field with incorrect answer Operating income Entry field with incorrect answer Less: Loss on old elevator Entry field with incorrect answer Net income $
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