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Problem 12-4 Last year (2016), Pina 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 $105,000 0 New Elevator $161,000 0 4 years Straight-line 5 years Straight-line Purchase price Estimated salvage value Estimated useful life Depreciation method Annual operating costs other than depreciation: Variable Fixed $34,500 22,000 $9,000 8,900 Annual revenues are $240,000, 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, Pina Condos will be able to sell it for $24,200. Your answer is partially correct. Try again. Determine any gain or loss if the old elevator is replaced. Loss on sale 60000 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 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 960000 Less costs: Variable costs 138000 S Fixed costs 88000 Selling & administrative 112000 Depreciation 84000 422000 Net income 538000 (2) The old elevator is replaced. Replace Old Elevator Revenues 960000 SU Less costs: Variable costs 36000 Fixed costs 35600 Selling & administrative 112000 Depreciation 161000 344600 Operating income 615400 (2) The old elevator is replaced. Replace Old Elevator Revenues 960000 Less costs: Variable costs 36000 Fixed costs 35600 Selling & administrative 112000 Depreciation 161000 344600 Operating income 615400 X Less: Loss on old elevator 70000 Net income 545400 LINK TO TEXT 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 138000 36000 -102000 Fixed operating costs 88000 35600 52400 Operating Income 615400 Less: Loss on old elevator 70000 Net income 545400 LINK TO TEXT 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 138000 36000 - 102000 Fixed operating costs 88000 35600 52400 X New elevator cost 0 161000 161000 Salvage on old elevator -24000 - 24000 Totals 226000 208600 87400 LINK TO TEXT

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