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 $98,500 $159,000 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 $34,400 $11,000 Fixed 22,400 8,600 Annual revenues are $240,000, 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, Richter Condos will be able to sell it for $24,700. Collapse question part (a) Correct answer. Your answer is correct. Determine any gain or loss if the old elevator is replaced. Entry field with correct answer Loss on sale $Entry field with correct answer 54100 Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT Attempts: 1 of 3 used Collapse question part (b) Correct answer. 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 $Entry field with correct answer 960000 Less costs: Variable costs $Entry field with correct answer 137600 Fixed costs Entry field with correct answer 89600 Selling & administrative Entry field with correct answer 112000 Depreciation Entry field with correct answer 78800 Entry field with correct answer 418000 Net income $Entry field with correct answer 542000 (2) The old elevator is replaced. Replace Old Elevator Revenues $Entry field with correct answer 960000 Less costs: Variable costs $Entry field with correct answer 44000 Fixed costs Entry field with correct answer 34400 Selling & administrative Entry field with correct answer 112000 Depreciation Entry field with correct answer 159000 Entry field with correct answer 349400 Operating income Entry field with correct answer 610600 Less: Loss on old elevator Entry field with correct answer 54100 Net income $Entry field with correct answer 556500 Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT Attempts: 1 of 3 used Collapse question part (c) 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 $ $ $