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            $103,000                $160,000

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                     $35,800                      $10,000  

Fixed                         $23,800                        $8,100

Annual revenues are $241,000, 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 $24,800.

Loss on sale is $57,600.

How do you make a 4-year summarized income statement for each of the following assumptions?

(1) The old elevator is retained.

Revenues                                                           $

Less costs:                                                                          

  Variable costs                $

  Fixed costs                      

  Selling & administrative                             

  Depreciation                  

Net income

(2) The old elevator is replaced.

Revenues                                                           $

Less costs:                                                                          

  Variable costs                $

  Fixed costs                      

  Selling & administrative                             

  Depreciation                  

Operating income                                                           

Less: Loss on old elevator                                                            

Net income