Question

Last year (2013), Richter Condos installed a mechanized elevatorfor its tenants. The owner of the company, Ron Richter, recentlyreturned from an industry equipment exhibition where he watched acomputerized elevator demonstrated. He was impressed with theelevator's speed, comfort of ride, and cost efficiency. Uponreturning from the exhibition, he asked his purchasing agent tocollect price and operating cost data on the new elevator. Inaddition, he asked the company’s accountant to provide him withcost data on the company’s elevator. This information is presentedbelow. Old Elevator New Elevator Purchase price $104,600 $159,979Estimated salvage value 0 0 Estimated useful life 5 years 4 yearsDepreciation method Straight-line Straight-line Annual operatingcosts other than depreciation: Variable $ 35,961 $ 10,706 Fixed23,500 8,159 Annual revenues are $240,567, and selling andadministrative expenses are $29,123, regardless of which elevatoris used. If the old elevator is replaced now, at the beginning of2014, Richter Condos will be able to sell it for $25,846. Collapsequestion part (a) Determine any gain or loss if the old elevator isreplaced. $