Last year (2016), Riverbed 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 $100,000 0 5 years Straight-line New Elevator $160,000 0 4 years Straight-line $34,700 24,000 $9,000 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, Riverbed Condos will be able to sell it for $25,600. Determine any gain or loss if the old elevator is replaced. Loss on sale 7 $ 54400 Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues $ 964000 Less costs: Variable costs 138800 Fixed costs 96000 Selling & administrative 112000 Depreciation 80000 426800 Net income $ 537200 (2) The old elevator is replaced. Replace Old Elevator 964000 Revenues Less costs: 36000 Variable costs $ Fixed costs 32400 112000 Selling & administrative 340400 160000 Depreciation 623600 Operating income 54400 I nee an old elevator Operating income 623600 Less: Loss on old elevator 54400 Net income 569200 e Textbook and Media 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 eg. (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