Old elevator new elevator
purchase price $102,500 $159,000
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 $34,000 $9,000
fixed 23,400 8,000
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, richter condos will be able to sell it for $25,100.
a. determine any gain or loss if the old elevator is replaced.
prepare a 4-year summarized income statement for each of the following assumptions:
(1) the old elevator is retained. (2) the old elevator is replaced.
c. 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. (