Last year (2016), Bramble 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 $103,500 $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 $11,000 Fixed 23,900 8,200 Annual revenues are $241,000, and selling and administrative expenses are $30,000, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2017, Bramble Condos will be able to sell it for $25,900. Determine any gain or loss if the old elevator is replaced. Loss on saleGain on sale $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Last year (2016), Bramble 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	$103,500		$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		$11,000
Fixed	23,900		8,200

Annual revenues are $241,000, and selling and administrative expenses are $30,000, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2017, Bramble Condos will be able to sell it for $25,900.

Determine any gain or loss if the old elevator is replaced.

Loss on saleGain on sale

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