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.

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two questions

price: 10.000

deadline: 24hours

Problem 7-4A 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 Purchase price Estimated useful life $159000 0 Estimated salvage value Depreciation method New Elevator $103,000 0 5 years 4 years Straight-line Straight-line $35,800 $10,000 23,300 8,600 Annual operating costs other than depreciation: Variable Fixed Annual revenues are $240,000, and selling and administrative expenses are $30,000, 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 $24,300. (a) Determine any gain or loss if the old elevator is replaced. $ (b) Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained (2) The old elevator is replaced (c) Using incremental analysis, determine if the old elevator should be replaced. Broadening Your Perspective 7-6 (Essay) Blake Romney became Chief Executive Officer of Peters Inc. two years ago. At the time, the company was reporting lagging profits, and Blake was brought in to \"stir things up.\" The company has three divisions, electronics, fiber optics, and plumbing supplies. Blake has no interest in plumbing supplies, and one of the first things he did was to put pressure on his accountants to reallocate some of the company's fixed costs away from the other two divisions to the plumbing division. This had the effect of causing the plumbing division to report losses during the last two years; in the past it had always reported low, but acceptable, net income. Blake felt that this reallocation would shine a favorable light on him in front of the board of directors because it meant that the electronics and fiber optics divisions would look like they were improving. Given that these are \"businesses of the future,\" he believed that the stock market would react favorably to these increases, while not penalizing the poor results of the plumbing division. Without this shift in the allocation of fixed costs, the profits of the electronics and fiber optics divisions would not have improved. But now the board of directors has suggested that the plumbing division be closed because it is reporting losses. This would mean that nearly 500 employees, many of whom have worked for Peters their whole lives, would lose their jobs. If a division is reporting losses, does that necessarily mean that it should be closed? Was the reallocation of fixed costs across divisions unethical? What should Blake do