Question

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 $104,500 $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 $35,600 $11,000 Fixed 23,200 9,000 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, Richter Condos will be able to sell it for $24,700. Collapse question part (a) Determine any gain or loss if the old elevator is replaced. Gain on saleLoss on sale $ Click if you would like to Show Work for this question: Open Show Work Link to Text Attempts: 0 of 15 used Save for later Submit Answer Expand question part (b) The parts of this question must be completed in order. This part will be available when you complete the part above. Expand question part (c) The parts of this question must be completed in order. This part will be available when you complete the part above.

Answer 1

Particulars	Old Elevator	New Elevator
Price	$    104,500.00	$      161,000.00
Life	5	4
Depreciation Per year	$      20,900.00	$        40,250.00

Price	$    104,500.00
less year 1 depreciation	$      20,900.00
Price at beg of 2017	$      83,600.00
Selling price	$      24,700.00
loss on sale	$      58,900.00

Statement showing gain or loss if old elevator replaced

Particurals	Old Elevator	Total in 4 years	New Elevator	Total in 4 years
Annual Revenues	$                       239,000.00	$                       956,000.00	$              239,000.00	$              956,000.00
Less
Variable Cost	$                          35,600.00	$                       142,400.00	$                11,000.00	$                44,000.00
Contribution	$                       203,400.00	$                       813,600.00		$              912,000.00
Less
Fixed cost	$                          23,200.00	$                          92,800.00	$                   9,000.00	$                36,000.00
Depreciation Cost	$                          20,900.00	$                          83,600.00	$                40,250.00	$              161,000.00
Selling and Admin exp	$                          29,000.00	$                       116,000.00	$                29,000.00	$              116,000.00
Profit	$                       159,300.00	$                       521,200.00		$              599,000.00
Less loss on sale				$                58,900.00
Net Gain		$                       521,200.00		$              540,100.00