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Problem 7-4A a-c (Video) At the beginning of last year (2019), Richter Condos installed a mechanized elevator for its tenants. The owner of the company,

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Problem 7-4A a-c (Video) At the beginning of last year (2019), 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 company's accountant to provide him with cost data on the company's elevator. This information is presented below. Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs other than depreciation Variable Fixed Old Elevator Elevator $102,500 $199,000 0 5 years Straight-line Straight-line 59.000 $34,000 23.400 8,000 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 2020, Richter Condos will be able to sell it for $25,100. Determine any gain or loss if the old elevator is replaced. Loss on sale 4600 Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator 960000 Revenues Less costs: Variable costs 136000 Faxed costs 21400 Selling & administrative Depreciation Net income (2) The old elevator is replaced. Replace Old Elevator (2) The old elevator is replaced. Replace Old Elevator 960000 Revenues Less costs: Variable costs Fixed costs Selling & administrative Depreciation Operating income Loss on old elevator Net income Using incremental analysis, determine if the old elevator should be replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -15 or parentheses e.g. (15).) Retain Old Elevator Replace Old Elevator Net Income Increase (Decrease) Variable operating costs Fixed operating costs New elevator cost Salvage on old elevator Totals The old elevator be replaced

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