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Last year (2016), Swifty 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 companys accountant to provide him with cost data on the companys elevator. This information is presented below.

		Old Elevator			New Elevator
Purchase price		$98,500			$161,000
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		$35,000			$11,000
Fixed		22,800			9,000

Annual revenues are $240,000, 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, Swifty Condos will be able to sell it for $25,700.

Determine any gain or loss if the old elevator is replaced. LINK TO TEXT Prepare a 4-year summarized income statement for each of the following assumptions: (1) The old elevator is retained. Retain Old Elevator Revenues Less costs: Variable costs Fixed costs Selling & administrative Depreciation Net income (2) The old elevator is replaced. Replace Old Elevator Revenues Less costs: Variable costs Fixed costs Selling & administrative Depreciation Operating income Less: Loss on old elevator Net income LINK TO TEXT 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 Fixed operating costs New elevator cost Salvage on old elevator Totals LINK TO TEXT

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