*Problem 20-4A (Part Level Submission) Last year (2016), Richter Condos installe

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 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 New Elevator Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs $96,000 $159,000 5 years 4 years Straight-line Straight-line other than depreciation: Variable Fixed $36,000 23,600 $10,000 8,700 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, Richter Condos will be able to sell it for $25,200. Your answer is partially correct. Try again. Determine any gain or loss if the old elevator is replaced. ss on sa Attempts: 1 of 5 used The parts of this question must be completed in order. This part will be available when you complete the part above. The parts of this question must be completed in order. This part will be available when you

Explanation / Answer

(a) Loss if the old elevator is replaced: Cost 96000 Less: Accumulated depreciation (96000/5) 19200 Book value 76800 Less: Sales proceeds 25200 Loss on sale 51600 (b) 1 Retain old elevator $ $ Revenues (239000*4) 956000 Less: costs Variable costs (36000*4) 144000 Fixed costs (23600*4) 94400 Selling and administrative (29000*4) 116000 Depreciation (96000/5)*4 76800 431200 Net income 524800 2 Replace old elevator $ $ Revenues (239000*4) 956000 Less: costs Variable costs (10000*4) 40000 Fixed costs (8700*4) 34800 Selling and administrative (29000*4) 116000 Depreciation (159000/4)*4 159000 349800 Operating income 606200 Less: Loss on old elevator 51600 Net income 554600

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