Annual revenues are $240,021, and selling and administrative expenses are $29,676, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2014, Richter Condos will be able to sell it for $25,108.
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.
Using incremental analysis, determine if the old elevator should be replaced.