Central Med Medical Clinic recently purchased an Electec model 1555 mobile CT Sc
ID: 2396224 • Letter: C
Question
Central Med Medical Clinic recently purchased an Electec model 1555 mobile CT Scanner for $225,000. Typically CMMC depreciates their medical equipment over a 3 year life, but they believe that the usage of the new mobile device and technology of the field will render the item obsolete within 1.5 years.
Which of the following depreciation methods would best allocate the cost of the CT scanner over it's estimated useful life?
Straight Line method
Units of Production method
Allowance method
Double Declining Balance method
A.Straight Line method
B.Units of Production method
C.Allowance method
D.Double Declining Balance method
Explanation / Answer
Answer is D. Double declining balance method.
Explanation:
Double declining method charges at double the rate of straight-line method but at written down value of the assets. Therefore, the amount of depreciation charged in the initial years is quite high as compared to the amount of depreciation in the later stages of the life of assets.
therefore, the assets having useful life is quite lesser than its actual life (or which has been used in the initial years of its purchased) should be charged as per Double declining method as it would be charged high amount of depreciation in the initial years in which the assets is used most.
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