Problem 12-4 Last year (2016), Culver 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 $160,000 $ 101,000 0 0 5 years Straight-line 4 years Straight-line Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs other than depreciation: Variable Fixed $34,600 23,900 $9,000 8,600 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, Culver Condos will be able to sell it for $24,900. Your answer is correct. Determine any gain or loss if the old elevator is replaced. Loss on sale 55900 SHOW SOLUTION LINK TO TEXT Your answer is partially correct. Try again. Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues 956000 Less costs: Variable costs 138400 Fixed costs 95600 > Selling & administrative 116000 X Depreciation 80800 80800 Net income 525200 (2) The old elevator is replaced. Replace Old Elevator Revenues 956000 Less costs: Variable costs 36000 Fixed costs 34400 Selling & administrative 116000 Depreciation 160000 Operating income 609600 Less: Loss on old elevator Net income Your answer is partially correct. Try again. 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 e.g. (45).) Retain Old Elevator Replace old Elevator Net Income Increase (Decrease) Variable operating costs X X Fixed operating costs New elevator cost Salvage on old elevator Totals LINK TO TEXT